220 - Unit 6 - Commercial Property

What does the building and personal property coverage form define?

! "The Building and Personal coverage form (1) defines what property is covered, not covered or excluded, (2) describes how limits and deductibles will apply, (3) adds conditions which will apply to losses, and (4) provides for certain optional coverages." is the correct answer to: "What does the building and personal property coverage form define?"

What are the common policy conditions of a commercial property contract?

"The Common Policy Conditions Form set forth provisions such as the insurer and insured rights and duties related to cancellations, changes in the policy, pursuit of the rights against others, transfer of the policy to another insured, and suits brought against the insurer." is the correct answer to: "What are the common policy conditions of a commercial property contract?"

personal property to others

, if covered, provides coverage for property owned by others and in the insured's care, custody or control. Personal property of others must be located in the premises described on the policy.

Name the three general types of properties that may be covered by the property coverage form?

1. "Personal property of others", 2. "your personal property" and 3. "building" are the types of property that may be covered.

What does the causes of loss form describe in a commercial property contract?

: The causes of loss form states the perils for which insurance is provided (fire, windstorm, etc.) with exclusions that limit application of coverage.

What must the basic commercial property contract contain?

A commercial property insurance policy must contain a declarations form, a common policy conditions form, a coverage form, a commercial property conditions form, and causes of loss form." is the correct answer to: "What must the basic commercial property contract contain?"

Control of Property

As previously discussed, insurance policies will not pay for damage intentionally caused by the insured. The commercial property policy will provide coverage where another intentionally damages the property beyond the insured's direction or control. If the insured intentionally damages one property, losses to other properties not intentionally damaged will be covered.

debris removal

Cost to remove debris following property damage by a cover loss is paid up to 25 percent of the amount paid for the loss plus the deductible. If the limit of coverage on the building has been exhausted by payment of the building loss, debris removal expense will pay an additional $10,000 toward each occurrence at each location.

Explain the primary purpose of commercial property insurance?

Coverage is provided for economic loss from damage to tangible property. Tangible property is buildings or other structures and their contents commonly known as personal property.

non-owned detached trailers

Coverage may be provided for detached trailers the insured does not own provided there is a written agreement whereby the insured agrees to provide coverage, the trailer is used in the insured's business, and the trailer is located on the premises described in the declaration page. The insured can purchase a limit of $5,000 or more and coverage is excess over any other insurance provided for the trailer.

What coverage is provided under the extension for property off premises?

Covered property other than stock held for sale while temporarily at a location not owned, leased, or operated by the insured is covered up to $10,000.

property off premises

Covered property other than stock held for sale while temporarily at a location not owned, leased, or operated by the insured is covered up to $10,000. Property in or on vehicles, in the custody of a salesperson, or at a fair or exhibition is not covered.

Causes of Loss Forms General:

Each property policy form requires the attachment of a cause of loss form which details which perils are covered by the policy. There are four cause of loss forms: (1) basic, (2) broad, (3) special and (4) earthquake (the earthquake form is not used in Florida).

What perils are covered in the causes of loss-basic form?

Eleven (11) basic perils are covered, fire, lightning, explosion, windstorm or hail, smoke, aircraft and vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

Business Income Coverage Forms:

In addition to direct losses (losses from fire, hurricane, or lightning), businesses also suffer indirect losses as a result of the direct losses. Indirect losses are loss of business income or the extra expense of operating elsewhere following a fire or hurricane.

Extra Expense Coverage Form:

In addition to purchasing the business income form with or without extra expense coverage, the insured may also purchase a policy providing coverage for extra expense only. This coverage is available for businesses that can continue operations by immediate relocation. The extra expense form reimbursements the insured for extraordinary expenses incurred to maintain uninterrupted operations. Coverage may be purchased for different lengths of time. The extra expense form normally has no deductible. The form provides for a percentage of recoverable limits, which may be recovered in thirty-day periods. For example, the declarations page may show limits of recovery of "40%-80%-100%. Such limits mean that 40 percent of the total limit is recoverable within the first 30 days. Eighty percent of the limit, including the original 40 percent, is recoverable within the first 60 days.100 percent of the limit including the previous month's limitations is recoverable within 90 days.

Coverage Options:

Maximum Period Of Indemnity - This option replaces the coinsurance condition with a condition that limits the period of indemnity to 120 days following the 72-hour deductible period. Monthly Limit of Indemnity - This option replaces the coinsurance condition with a provision that limits the amount of recovery to a fraction of the coverage limit during each consecutive thirty days following the loss. The fractions available are 1/3, ¼, and 1/6. Agreed Value - This option replaces the coinsurance condition with an agreed value. The insured submits financial data for both the prior and the next 12 months. The insurer then agrees to the value set forth in the policy. The policy shows an expiration date for the agreed value. If the agreed value expiration date expires, the policy again becomes subject to a coinsurance provision. Extended Period of Indemnity - The normal thirty-day extended period of indemnity may be increased to any longer period up to 730 days. Business Income From Dependent Properties coverage is also available. This coverage provides loss of income coverage should a supplier, customer, or a dependent location be damaged by a covered peril.

valuation

Payment or loss for damage to covered property is made on actual cash value (deduction for depreciation) basis, subject to several exceptions. If the replacement value of a building loss is less than $2,500, and the insured is in compliance with the coinsurance clause, full replacement cost is paid. This provision does not apply to awnings, floor coverings, appliances, or outdoor equipment or furniture. Stock, which has been sold but not delivered, is covered for its net selling price (the selling price less any discounts allowed). If required by law, glass replacement includes the cost of safety glazing material. Valuable papers and records are covered for the cost of blank materials used to reproduce the papers and records including labor costs to transcribe or copy duplicate records. Tenant's improvements and betterments if not promptly repaired after a loss are covered based on the following formula: original cost times the prorated number of days remaining in the lease. This formula gets the insured recovery for the investment in property which the tenant would have had, had loss not occurred.

changes

The commercial property policy may be changed by endorsement. The changes must be agreed to by the company and the first named insured in the policy.

Condominium Unit Owners Form

The condominium unit owner's form provides coverage for a commercial unit owner's business personal property and can include personal property of others in the insured's care, custody or control.

Covered property

is defined as the structure being built, including foundations, fixtures and machinery, equipment to service the building, and owned materials and supplies used for construction. If not covered by other insurance, temporary structures built or assembled on the site may also be included.

Describe the legal liability coverage form? A legal liability form to cover the insured for n_______ damaging property owned by others but in the insured's care, custody or control

negligently

Condominium Coverage Forms:

two forms 1. condo association form 2. condo unit owner form

Coverage under the builder's risk form terminates when

(1) the policy is canceled or expires (2) the property is accepted by the purchaser (3) the insureds interest in the property ceases (4) the property is abandoned and there is no intention to complete it (5) 90 days after construction of the building is completed (6) 60 days after the building is occupied in whole or in part or if the building is put to its intended use.

building and personal coverage form

1) defines what property is covered, not covered or excluded, (2) describes how limits and deductibles will apply, (3) adds conditions which will apply to losses, and (4) provides for certain optional coverages.

Major commercial property coverage forms are:

1. Building and Personal Property Coverage form 2. Builder's Risk Coverage form 3. Business Income Coverage form 4. Extra Expense Coverage form 5. Legal Liability Coverage form 6. Glass Coverage form 7. Condominium Association Coverage form 8. Condominium Commercial Unit-Owners Coverage form 9.Leasehold Interest Coverage form

Each of these forms state which perils are covered on the property policy. All of the forms exclude the following:

1. Loss resulting from enforcement of building ordinances, which regulate construction, use or repair of property, or demolition. While excluded on the causes of loss form, coverage is available by endorsement. 2. Earth movement except for damage caused by resulting fire or explosion. Sinkhole collapse is covered on all property policy as mandated by Florida Statute. 3. Seizure or destruction by government authority, except destruction to prevent spread of fire. 4. Nuclear reaction, radiation or radioactive contamination except for damage caused by resulting fire. 5. Loss from utility service failure where the utility failure occurs anywhere outside the building. 6. War and related incidents such as insurrection and rebellion. 7. Flood, rising waters, mudslides, backing up of water through sewers or drains, and underground water seepage. Resultant damage by fire, explosion or sprinkler leakage from one of these perils is covered. 8. "Fungus," wet rot, dry rot, and bacteria unless resulting from a specified cause of loss. 9. Damage to wiring or devices caused by artificially generated electrical current. Resultant damage from fire is covered. 10. Explosion of steam boilers, pipes, engines or turbines. Resultant damage by fire or combustion explosion is covered.

There are three general types of property

1. building 2. your business personal property 3.personal property of others

building and personal property coverage form

1. property off premises 2. outdoor off premises 3. outdoor property

two business income forms

Business Income with or without Extra Expense. The difference between the business income forms lies in how extraordinary expenses are handled. The business income coverage form pays extra expenses which avoid or minimize the suspension of business or allow the insured to continue operations at the described premises or at another location (only to the extent that they reduce the loss: such expenses must be incurred to shorten the period of interruption at the damaged premises), extra expenses to expedite the reopening (paid without regard to whether or not they actually result in a reduction of the business income loss), and to repair or replace property, or to research, replace or restore the lost information on damaged valuable papers and records (covered only to the extent that such expenses reduce the amount that otherwise would have been paid). A coverage extension provides $100,000 automatic coverage for 30 days for each newly acquired location. A limitation applies to business income caused or partially caused by damage to electronic media or records. The period of indemnity (period to recover from a loss) is the longer of 60 days from the date of damage, or the restoration period related to other damaged property.

Concealment, Misrepresentation, Fraud

Coverage under the policy is declared to be voided by the insurer if the insured engages in any fraud or materially misrepresents information or facts. Florida statute will only allow an insurer to avoid paying a claim when misrepresentation or concealment is involved if the misrepresentation or concealment are fraudulent or material which means the insurer would not have issued the policy or would not have issued the policy at the same premium or limit of insurance if the insurer knew about the increase in hazard concealed or misrepresented by the insured.

outdoor property

Fences, radio or TV antennas and trees, shrubs and plants are covered up to $1,000 (not more than $250 on any one tree, shrub or plant) for the perils of fire, lightning, explosion, riot or civil commotion or aircraft. Signs are limited to $2,500 and the perils covered are governed by the Causes of Loss form attached to the policy. Cost of debris removal is included.

agreed value

If agreed value is provided, the coinsurance condition is waived by the insurer (the insured will not have to pay a coinsurance penalty). The agreed value endorsement is added to the policy after the insured signs a statement of values and files the statement with the insurer. The declarations page of the policy normally states an expiration date for the agreed value option. If the policy continues past the expiration date for the agreed value option without renewal of the option, the coinsurance condition will be reinstated.

other insurance

If more than one policy with the exact same coverage, terms, and conditions is written on the same property, the policies will prorate any claim payments. If more than one policy, with different coverage, terms, and conditions is written on the same property, the policy will be excess over the other policy whether collectible or not.

extensions of coverage

If the insured meets the requirement of insuring the cover property to 80 percent of its value (80 percent coinsurance clause), the coverage of the policy is further broadened by several "coverage extensions" which provide additional coverage in addition to the policy limits.

personal effects and property of others

If the policy includes "your business personal property," up to $2,500 is available at each premises to cover personal effects owned by the named insured's partners and employees (excluding loss by theft) and for personal property of others in the care, custody or control of the insured.

What is covered under the term "personal property of others"?

Personal property of others provides coverage for property owned by others and in the insured's care, custody or control. Personal property of others must be located in the premises described on the policy.

increase cost of construction

Some counties or municipalities have laws or ordinances that require a damaged dwelling or building to be brought up to the current building codes when being repaired after a loss. There may be additional construction cost when these buildings are brought up to the current building code. This coverage covers this increased cost of construction. The new ordinance or law must have been in effect at the time the loss occurs. Replacement cost must be selected for the loss. There is no coverage for ordinances or laws the insured should have complied with prior to the loss but did not.

subrogation

Subrogation is the insurer's right to collect damages on behalf of the insured from other parties who are responsible for the loss under the insurance policy. We previously discussed the principle of indemnity. The insurer should pay the insured or pay on their behalf without allowing the insured to "gain" on the loss. The subrogation clause allows the insurer to collect from an at fault party. If the insured were allowed to collect from both the insurer and the at fault party, he or she would certainly have gained from the loss. If an insured collects directly from an at fault party, the insurer will frequently refuse to pay any portion of the claim; the insured has violated the insurer's right to collect damages from other parties. The insured is granted permission under the commercial property policy to waive rights against others under certain conditions; such waiver must be in writing prior to the loss, except the waiver may be after the loss if the waiver is given to another insured, a related business firm, or a tenant of the insured.

the commercial property contract

The Common Policy Conditions Form and the Commercial Property Conditions Form set forth provisions such as the insurer and insured rights and duties related to cancellations, changes in the policy, pursuit of the rights against others, transfer of the policy to another insured, and suits brought against the insurer.

builders risk

The builder's risk coverage form is similar to the building and personal property coverage form. Building materials and supplies that are owned by others and in the insured's care, custody or control if located in or on the building or within 100 feet of the premises and intended to become a permanent part of the building may be covered. A coverage extension gives an automatic $5,000 coverage; a higher limit may be purchased for building materials.

Causes Of Loss Basic Form:

The basic form covers several named perils. The basic form is a specified perils form; in order for a loss to be covered the loss must have been caused by one of the following named perils: 1. Fire and removal; 2. Lightning; 3. Explosion, but not rupture, bursting or operation of pressure relief devices or rupture or bursting due to expansion or swelling of contents caused by or resulting from water; 4. Windstorm or hail, but excluding frost, cold weather, ice, snow, sleet, or any interior damage unless there is first exterior damage to the structure, walls, or roof by wind or hail; 5. Smoke, which must be sudden and accidental, but not smoke from agricultural smudging or industrial operations; 6. Aircraft (including spacecraft and missiles) or vehicles, meaning physical contact by such, or an object thrown up by a vehicle or objects falling from an aircraft. Damage caused by vehicles owned or operated by the insured is not covered; 7. Riot or civil commotion including attendant looting and acts of striking employees while occupying the insured's premises; 8. Vandalism, except damage to non-structural building glass or to outside signs or damage caused by theft (except building damage from forcible entry or exit by burglars); 9. Sprinkler leakage, leakage or discharge from an automatic sprinkler system, including collapse of the system's tank; building coverage includes repair of the system if the damage results in sprinkler leakage or is directly caused by freezing, including the cost to tear out and replace any part of the building in order to repair the system; 10. Sinkhole collapse, defined as the sudden sinking or collapse of land into underground empty spaces created by action of water or rock formations; cost to fill sinkholes is not covered; 11. Volcanic action, airborne blast, shock waves, ash, dust, and lava flow; Perils not named as covered by the basic form are excluded from coverage. In addition to the general exclusions, the basic form also excludes rupture or bursting of water pipes, or leakage or discharge of water or steam from breaking or cracking of a system or appliances unless such damage is from an automatic sprinkler system or is caused by a covered cause of loss. Mechanical breakdown is excluded although resultant damage from a covered clause of loss is covered. All cause of loss forms contain additional limited coverage for "fungus," wet rot, dry rot, and bacteria. This additional coverage will provide coverage for direct physical loss including the cost of removal, tearing out and replacing any part of the building to access the damage and the cost of testing after removal for a covered cause of loss other than fire or lightning. The coverage has an annual aggregate limit of $15,000. This additional coverage does not increase the limit of insurance.

liberalization

The commercial property policy contains a liberalization clause which states that if an insurer changes the policy form to broaden coverage and does not charge an additional premium for the broadened coverage, either before the start of the policy period (usually 45 days) or during the policy period, the insured will automatically (without additional premium) receive the broadened coverage on the new form. With the liberalization clause in the policy, the insurer does not have to cancel and rewrite policies to give the insured the broadened coverage. The liberalization clause only applies to broadened coverage. If the insurer restricts coverage in a new policy form, the insured will not be subject to the restricted coverage during the policy period.

What does the Coverage Form describe in a commercial property contract?

The coverage form describes the property covered and provides for added conditions relating to that subject.

inflation guard

The inflation guard endorsement states an annual rate increase by which the building or contents limits will be increased during the policy term. These limits are increased pro rata during the policy term without a separate endorsement being issued by the insurer.

transfer

The insured may not transfer any rights or duties under the policy except with written consent of the insurer. Rights and duties are automatically transferred if the insured dies, first to one who has legal temporary custody of the property and then to the legal representative.

mortgagee

The mortgagee clause in the building and personal property coverage form provides that a loss will be paid to a mortgage company shown on the declarations page of policy. The protection of the mortgagee, in the event of loss, is not impaired by omissions of the insured. The mortgagee is allowed to pay premiums and submit a proof of loss after the insured has failed to do so. The mortgagee clause also guarantees the mortgage holder advance notice of cancellation or non-renewal of policy.

Peak Season

The peak season endorsement is used for an insured who has larger amounts of personal property at certain times of the year. The peak season endorsement is commonly used for retail insureds that have higher inventories during the Christmas season. This endorsement allows a different limit of insurance during a stated time period than the limit shown on the declarations page of the policy.

What are the standard deductibles in a commercial property contract?

The standard deductible is $500 for all loss or damage in any one occurrence for all perils other than hurricanes. Optional higher deductibles such as $1,000, $5,000, $10,000, or higher can be purchased.Remember: The insurer must offer the insured the option of having the deductible apply either on a per event or an annual basis.

The insured's covered building, with a value of $125,000, insured for $100,000, was a total loss from a covered cause of loss. Cost of removing debris, after loss, was $7,000. The policy deductible is $5,000. With no other coverage issues, how much is payable to the insured?

The statement should read: $107,000. The deductible applies to the loss ($125,000), not to the amount of insurance. Remember: $100,000 total loss plus $7,000 cost of removing debris after loss.

Automatic Coverage -

Thirty day automatic coverage (the insured does not need to notify the insurer) is provided for (1) new buildings under construction at the insured's premises or buildings acquired at other premises for up to $250,000 per buildings, and (2) personal property at newly acquired locations up to $100,000 in each building.

business income coverage forms have deductibles

This deductible is based on the period of restoration. Period of restoration means the time period following a physical damage loss when an insured is repairing or replacing property damage. The business income coverage form has a deductible of 72 hours. Coverage ends on this policy form on the earlier of: (1) the date when the damage property could be repaired, rebuilt or replaced with reasonable speed, or (2) the date the business begins operations at any new, permanent location.

What is compliance with the coinsurance condition in the business income form?

True or False: The amount of insurance must be equal to the coinsurance percentage times the total of net pre-tax profit or loss and all operating expenses that would have been earned for the 12 months following inception or the last anniversary date of the policy. If, at the time of the loss, the coverage amount is found to be less, the company is responsible only for the proportion of loss which the limit carried bears to the required limit.

What is the difference between the two business income coverage forms?

True or False: The study guide details two business income forms; business income with or without extra expense. The difference between the business income forms lies in how extraordinary expenses are handled. The business income and extra expense coverage form pays extra expenses which avoid or minimize the suspension of business or allow the insured to continue operations at the described premises or at another location (only to the extent that they reduce the loss: such expenses must be incurred to shorten the period of interruption at the damaged premises), extra expenses to expedite the reopening (paid without regard to whether or not they actually result in a reduction of the business income loss), and to repair or replace property, or to research, replace or restore the lost information on damaged valuable papers and records (covered only to the extent that such expenses reduce the amount that otherwise would have been paid). true

Value Reporting -

When a business's personal property values fluctuate, the insured can purchase a value reporting endorsement. The insured purchases a provisional amount of coverage, which is a limit of their peak values. This is the maximum amount of coverage that will apply to each location in the event of a loss. The insured makes periodic reports of actual values. The value reporting form requires that values be reported timely and accurately. After the policy has expired, the insurer will average values on reports and adjust the premium to charge for the average values reported. There are several penalties for not reporting on a timely and accurate basis. If, at the time of loss, the first report of values is overdue, the insurer will only pay 75 percent of the loss. If the first report was made but a later report is overdue, the insurer will pay the maximum value last reported. If the last reported was understated, the loss payment is based on a formula similar to the coinsurance formula to penalize the insured for the understatement.

preservation of property

When covered property is taken from the premises at the time of loss to protect it from loss, coverage for a covered peril will include any damage caused during the moving of the property or while it is any temporary location for up to 30 days.

Can endorsements be attached to these required forms?

Yes, to restrict or expand the coverage provisions of the basic forms.

Is coinsurance required in the business income coverage form?

Yes. In its basic form, it contains a coinsurance condition and contemplates entry of a coinsurance percentage in the declarations. Optional coinsurance percentages begin at 50% through 125%.

What are the condominium coverage forms? There are two condominium forms available, the condominium a______ form and the condominium u____ owners form.

association, unit

Describe the condominium unit-owners form? It is designed for the unit owner of a c________. It is used only for c_______, not residential, condominiums. It covers the unit-owner's business p______ p________ and the p______ p______ of others in the insured's care, custody or control.

condominium, commercial, personal property, personal property

Business Income form

contains an insurance condition providing the amount of insurance must be equal to the coinsurance percentage times the total of net pretax profit or loss in all operating expenses that would have been earned for the twelve months following inception of the policy. Coinsurance may be purchased at 50 percent, 60 percent, and 70 percent, 80 percent, 90 percent, 100 percent, 125 percent or none. If, at the time of loss, the coverage amount is less than required by the coinsurance clause, the insurer will only pay the proportion of loss which the limit carried bears to the required limit.

Describe the extra expense coverage form? Coverage, which reimburses the insured for e______ e_______, incurred to maintain u_______ operations, during the period of r________.

extraordinary expenses, uninterrupted, restoration

Are there coverage options in the business income form?Yes, there are four: m_____ p______ if indemnity, m______ l_____ of indemnity, a_____ v_____ and e_____ p_____ of indemnity.

maximum period, monthly limit, agreed value, extended period

business income

means net profit or loss before income taxes, which would have resulted from continuing normal operations following a direct loss. Rental value covers the insured's indirect loss of rents following a direct loss; rental value may be included in the definition of business income. Extra expense coverage reimburses the insured for additional expenses incurred after a physical damage loss. The extra expenses are above and beyond the normal expenses incurred by the business.

How are deductibles applied for hurricane losses in a commercial property contract?

or hurricanes, a separate minimum deductible of $500 applies. The insurer must offer the insured the option of having the deductible apply either on a per event or an annual basis. Optional higher deductibles of $1,000, $5,000, $10,000 or higher may be purchased.

"Define "covered property" in the builder's risk coverage form?"

overed property includes the structure being built, including foundations; fixtures and machinery; equipment to service the building; and owned material and supplies used for construction, including temporary structures built or assembled on site." is the correct answer to:

commercial property

sometimes referred to as commercial fire and allied lines coverage Commercial property insurance is first-party coverage (first-party meaning the insurer pays the insured directly as opposed to liability coverage where a third person is paid for damages). Coverage is provided for economic loss from damage to tangible property. Tangible property is buildings or other structures and their contents commonly known as personal property.

A Causes of Loss Form

states the perils covered by the policy. The Causes of Loss form also shows any exclusions, which are applicable to the policy.

What are the exclusions for all cause of loss forms? True or False: (1) Loss resulting from enforcement of building ordinances, which regulate construction, use or repair of property, or demolition. While excluded on the causes of loss form, coverage is available by endorsement; (2) Earth movement except for damage caused by resulting fire or explosion. Sinkhole collapse is covered on all property policy as mandated by Florida Statute; (3) Seizure or destruction by government authority, except destruction to prevent spread of fire; (4) Nuclear reaction, radiation or radioactive contamination except for damage caused by resulting fire; (5) Loss from utility service failure where the utility failure occurs anywhere outside the building; (6) War and related incidents such as insurrection and rebellion; (7) Flood, rising waters, mudslides, backing up of water through sewers or drains, and underground water seepage. Resultant damage by fire, explosion or sprinkler leakage from one of these perils is covered; (8) "Fungus," wet rot, dry rot, and bacteria unless resulting from a specified cause of loss; (9) Damage to wiring or devices caused by artificially generated electrical current. Resultant damage from fire is covered; and (10) Explosion of steam boilers, pipes, engines or turbines. Resultant damage by fire or combustion explosion is covered.

true

What are the exclusions for business income and extra expense coverages? True or False: As to business income and extra expense coverages, all causes of loss forms exclude loss from damage to antenna equipment, delays in property restoration caused by strikers or other persons, loss of any license, loss of a lease or contract (unless cause by the suspension of operations, in which case the loss of business income during the period of restoration is covered). For Business Income, loss from damage to stock manufactured by the insured, or the time required to reproduce such stock is also excluded.

true

"need for adequate insurance" claus

which replaces the coinsurance clause. The clause states that the insurer is only responsible for the portion of any loss which the limit of insurance bears to the value at completion. The formula is the same as the coinsurance formula in the building and personal property coverage form using 100 percent of the expected completed value as the required limit of insurance.

Business Income Two Forms

1. business income with 2. business income without an expense The difference between the business income forms lies in how extraordinary expenses are handled. The business income coverage form pays extra expenses which avoid or minimize the suspension of business or allow the insured to continue operations at the described premises or at another location (only to the extent that they reduce the loss: such expenses must be incurred to shorten the period of interruption at the damaged premises), extra expenses to expedite the reopening (paid without regard to whether or not they actually result in a reduction of the business income loss), and to repair or replace property, or to research, replace or restore the lost information on damaged valuable papers and records (covered only to the extent that such expenses reduce the amount that otherwise would have been paid). A coverage extension provides $100,000 automatic coverage for 30 days for each newly acquired location. A limitation applies to business income caused or partially caused by damage to electronic media or records. The period of indemnity (period to recover from a loss) is the longer of 60 days from the date of damage, or the restoration period related to other damaged property.

vacancy

If the insured building has been vacant for more than 60 consecutive days prior to a loss, a loss from vandalism, sprinkler leakage (unless protected steps against freezing have been taken), building glass breakage, water damage, theft or attempted theft will not be covered. For any other covered perils, the amount payable for the claim is reduced by 15 percent. These limitations and suspensions may be eliminated by the attachment of a vacancy permit endorsement to the policy.

valuable papers and records

If the policy includes "your business personal property," the policy will pay the cost of research up to $2,500 at each premises for the cost to research, replace or restore lost information from papers and records.

Building Ordinance Coverage

Many communities have laws, which require demolition of damage portions of building if the damage exceeds a certain percentage of building. In addition, the building, zoning, or land use laws may have been upgraded since the insured's building was built prohibiting the insured from replacing the building using the original construction. The building ordinance coverage endorsement covers the insured for the additional cost caused by enforcement of laws which require demolition of undamaged portions of buildings (covering of the value of the undamaged portion and the costs to demolish) and/or higher cost of repair or reconstruction based on upgraded building, zoning or land use laws. An 80 percent or higher coinsurance clause and replacement cost coverage are prerequisites.

pollution clean up and removal

Pays a maximum of $10,000 total for losses during any 12 month period only if reported to the insurer within 180 days of the date of the covered loss. This coverage pays for the cost of extracting pollutants from the ground or water if the pollution is created by a covered cause of loss.

Condominium Association Form:

The Condominium Association Coverage form covers buildings, business personal property and personal property of others in the care, custody or control of the association. The definition of building covers such items as outdoor fixtures, permanently install fixtures and equipment, fixtures, improvements and alterations that are a part of the building, and certain appliances (even if owned by the unit owner so long as the association agreement requires the association to insure these items). The definition of building does not include personal property owned, used or controlled by a unit owner. The definition of business personal property includes only property owned by the association or owned indivisibly by all unit owners. If both the association and unit owner's policies provide coverage for a loss, the association policy is primary. All recovery rights against unit owners are waived.

Causes of Loss Broad Form:

The broad form covers several additional named perils. The broad form is also a specified perils form; in order for a loss to be covered the loss must have been cause by one of the following named perils: The Broad Form covers all of the perils mentioned in section 6.11 Basic Form plus: 1. Falling objects are covered excluding personal property in the open and interior building or content damage unless the falling object first damages the exterior walls or roof; 2. Damage done by the weight of ice, snow or sleet is covered. Damage to gutters, downspouts or outside personal property is not covered; 3. Water damage from accidental discharge or leakage of water or steam from a system, other than an automatic sprinkler system, including (if the building is covered) cost to tear out a part of the building to repair damage to the system is covered. Coverage does not include cost to repair the automatic sprinkler system, continuous or repeated seepage that occurs over a period of 14 days or more, or loss from freezing unless appropriate preventive measures were taken to prevent damage; 4. The Broad form also includes coverage for collapse. The collapse must be caused by one of the previously specified causes of loss, hidden decay, insect or vermin damage, weight of people, weight of personal property, or rain that collects on the roof, occur during construction, or occur during remodeling or renovation if caused by the use of defective materials or methods. Loss to outdoor and exterior property is excluded. Breakage of building glass, excluding neon tubing, provides coverage for any cause not generally excluded (section 4.10); a limit of $100 applies per plate or similar unit of glass subject to a $500 limit per occurrence.

What does the declarations identify in a commercial property contract?

The declarations identifies the insured and property covered, states the limits of insurance, deductible, inception and expiration dates of coverage, identify the forms and endorsements that apply, and may contain certain other information relevant to the risk, such as identification of mortgage holders." is the correct answer to: "What does the declarations identify in a commercial property contract?"

cancellation and nonrenewal

The insurer is required to give 20 days notice of cancellation for cancellations within the first 90 days the policy is enforced. After the first 90 days, the insurer must give 45 days written notice of cancellation except for cancellation for nonpayment of premium, which is 10 days. The insurer must give at least 45 days written notice of non-renewal. The notice of non-renewal or cancellation must state the reason for cancellation or non-renewal unless the insurer is canceling for material misrepresentation or misstatement or failure to comply with the underwriting requirements of the insurer. Although commercial property policies require a 45-day notice for non-renewal, a commercial residential property policy requires a 100-day notice to the insured. If the commercial residential insured has had coverage with the same company for a least five years, the company must give 120 day's notice for cancellation or non-renewal.

Leasehold Interest Form:

The leasehold interest form provides coverage after a direct loss from a covered peril to a tenant who loses a favorable lease. The form pays the difference in lease charges between the favorable lease lost due to a fire or other peril and the actual lease amount charged at a new location. The difference is paid for the balance of the lease period. Coverage may also include a tenant's loss of a favorable sublease. Coverage may be included for the prorated remaining value of a bonus paid to acquire a lease or for the prorated remaining value of the tenant's improvements and betterments including any increased rental value resulting from such improvements being made. Coverage may include the loss of any prepaid rents. "Remaining values" covered under the leasehold interest form mean the remaining portion of values following the date of loss to the end of the lease period.

policy period, territory

The policy covers property within United States, Puerto Rico and Canada. The policy covers losses, which commenced or started within the policy period. If a claim for windstorm is made, the windstorm or hurricane must begin before the expiration date shown on the policy. As long as the loss begins before the expiration date, the entire loss will be covered by the policy.

Fire department service charge

The policy will pay up to $1,000 for a fire department service call to protect the covered property from a covered loss if the service call was based on a contractual agreement with the fire department or required by ordinance. The $1,000 fire department service charge is covered as an additional amount of insurance.

replacement cost

The replacement cost endorsement changes the policy to pay for building or personal property losses on a replacement cost basis without deduction for depreciation. This endorsement is not usually available for property of others, residential contents, manuscripts, or property such as works of art and antiques. The insured must cover the property for at least 80 percent of the replacement cost. Unless the insured actually repairs or replaces the damage property within a reasonable time, the insurer will pay the loss on an actual cash value adjustment basis. Even if the replacement cost endorsement applies, the insured can notify the insurer within 180 days after a loss of the insured's option to take actual cash value settlement.

deductible

The standard deductible for a commercial property policy is $500 per occurrence for all perils other than hurricanes. For hurricanes, a separate deductible applies. The insurer must offer the insured the option of having the deductible apply either on a per event or an annual basis. Optional higher deductibles of $1,000, $5,000, $10,000 or higher may be purchased.

An insured with a building and personal property form, which covers a building for $500,000 and personal property for $150,000, purchases a building and its furniture at another location. What coverage, if any, is provided by the policy for this new purchase?

The statement should read: $250,000 on the building and $100,000 on its contents is automatically covered for a 30-day period. Remember: Thirty day automatic coverage (the insured does not need to notify the insurer) is provided for (1) new buildings under construction at the insured's premises or buildings acquired at other premises for up to $250,000 per buildings, and (2) personal property at newly acquired locations up to $100,000 in each building.

conditions

There are 9 conditions in the building and personal property coverage form. These conditions prohibit the abandonment of property to the insurer, provide for appraisal/arbitration in the event the insurer and insured disagree on the amount of loss, described the insured's duties after a loss (prompt notice to the insurer, protection of property from further damage, cooperation with the insurer, allowing inventory of property, permitting the insurer to inspect the property, and submitting a sworn proof of loss), describe when the insurer will pay for losses, and describe the insurer's rights to recover property. A coinsurance clause applies to the loss if a coinsurance percentage is stated on the declarations page. The study manual gives details on three conditions:

Causes of Loss Special Form:

Unlike the Basic and Broad forms, the Special Form is an "all risk" form. The Special form covers all risk of direct physical loss except as excluded or limited. The Study Manual lists primary examples of exclusions found in the special form. These exclusions are: wear and tear, rust, decay, deterioration, smog, release of contaminants or pollutants, settling, cracking, nesting, infestation or discharge/release of waste products or secretions by insects, birds, rodents or other animals, breakdown, temperature changes, marring or scratching, prolonged leakage or seepage of water, dishonesty of the insured or their employees, voluntary parting with property through trick or device, loss to property in the open from rain, snow, ice or sleet, acts or decisions of a governmental body, errors in planning, zoning, development, surveying, sitting, design, workmanship, materials or maintenance.

Legal Liability Coverage Form:

We previously discussed fire legal liability. Under the coverage for fire legal liability only the peril of fire is covered. The legal liability coverage form provides coverage for the insured for negligently damaging property owned by others in the insured's care, custody or control. Coverage may apply for the insured's negligent acts which cause damage to a building owned by others, or for damage to personal property such as customer's goods or leased equipment. This form includes legal costs of defending the insured against claims of others. This form has no deductible or coinsurance clause.

Describe the condominium association form? It insures a condominium association against direct physical loss of damage to b_____, and b_____ p_____ p______ of others in the care, custody or control of the association and located at the p_______.

buildings, business personal property, premises

What perils are covered in the causes of loss-broad form? True or False: Two specified perils, water damage, and collapse in addition to the 11 specific perils in the Basic Form.

false Falling Objects, Damage done by the weight of ice, snow or sleet, Water damage from accidental discharge or leakage of water or steam from a system, Collapse

property not covered

identifies several types of property not covered by the policy including accounts, bills, currency, deeds, evidence of debt, money or securities, and unless specifically provided for bullion or manuscripts, animals (unless boarded or held for sale), autos for sale, paved surfaces, cost of ground preparation, property below basement or ground level, land, crops, bulkheads, pilings, piers, wharves or docks, retaining walls that are not part of the building itself, self propelled machines other than those that are held as stock for sale or which are licensed for road use or operated principally away from the premises, fences, outdoor radio or TV antennas (including, satellite dishes), wiring, masts, outdoor signs that are not attached to the building (if attached, they are covered up to $2,500 per occurrence), and outdoor trees, shrubs, and plants.

your business personal property

includes business contents such as furniture, fixtures, machinery, equipment, stock and other contents used in the business. If the insured is a tenant, personal property includes improvements and betterments. Improvements and betterments are fixtures, alterations, installations, or additions to the building, which are not removable and made or acquired at the tenant's expense. All such property is covered while within the building or within 100 feet of the premises if in the open or in a vehicle.

building

means a structure described on the declarations page of the policy. Building may include completed additions, outdoor fixtures, installed fixtures, permanently installed machinery and equipment, personal property used to service the premises (fire extinguishers), outdoor equipment, floor coverings, refrigeration, ventilating, cooking, dish washing, and laundering appliances. If not otherwise covered by a separate policy, "building" may also included additions under construction, alterations and repairs including materials, equipment, supplies and temporary structures on or within 100 feet of the premises. "building" may also included additions under construction, alterations and repairs including materials, equipment, supplies and temporary structures on or within 100 feet of the premises.

"Business income"

means net profit or loss before income taxes, which would have resulted from continuing normal operations following a direct loss. Rental value covers the insured's indirect loss of rents following a direct loss; rental value may be included in the definition of business income. Extra expense coverage reimburses the insured for additional expenses incurred after a physical damage loss. The extra expenses are above and beyond the normal expenses incurred by the business. The business income coverage forms have a deductible. This deductible is based on the period of restoration. Period of restoration means the time period following a physical damage loss when an insured is repairing or replacing property damage. The business income coverage form has a deductible of 72 hours. Coverage ends on this policy form on the earlier of: (1) the date when the damage property could be repaired, rebuilt or replaced with reasonable speed, or (2) the date the business begins operations at any new, permanent location.

Extra Expense Coverage Form: What are the recoverable limits of the extra expense coverage form? The form provides for a percentage of r______ limits, which may be recovered in t_____-day periods.

recoverable, thirty

What coverage is provided for collapse? True or False: The collapsed must be caused by one of the previously specified causes of loss, hidden decay, insect or vermin damage, weight of people, weight of personal property, or rain that collects on the roof, occur during construction, or occur during remodeling or renovation if caused by the use of defective materials or methods.

true

What is the leasehold interest form? True or False: An available form to cover the following exposures resulting in loss after damage to premises from a covered peril; tenant loss of a favorable lease; tenant loss of a favorable sublease; loss of the remaining value of a bonus paid to acquire a lease; loss of the remaining value of improvements by a tenant; loss of remaining value of prepaid rents.

true