ANIS 23 pt. 2
A building is insured for $200,000 under an agreed value policy. The policy has a $10,000 deductible and the agreed value of the building is $220,000. After suffering a $43,000 loss, the insurer will pay (rounded to the nearest $10)
$29,090. The insurer will pay $29,090. [($200,000/220,000) X 43,000] -10,000 = $29,090
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?
$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?
$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 reinsurance penalty will apply because the building was insured at a value above $1,980,000 ($2.2 million x .9).
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?
$69,000 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.
Blithe Manufacturing has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss—Broad Form. The building has a $1.5 million limit and the business personal property is insured under a Value Reporting Form subject to a $1million limit. When a fire destroyed the building and personal property, the value of the covered personal property was $850,000. The last monthly report of value was made on time and accurately showed the value of personal property to be $765,000 at the time of the report. Ignoring any deductibles that may apply, how much would Blithe's insurer pay for the business personal property loss?
$850,000 Blithe's insurer would pay the full $850,000 for the business personal property loss. Even though the value of the covered personal property increased by $85,000 since the last report, the loss would be covered in full because the last report was on time and accurate.
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
Actual cash value.
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
Actual cash value.
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?
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
Which one of the following common policy conditions permits the insurer to verify property and business income values necessary for premium rating purposes?
Examination of books and records
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
External exposure.
Which one of the following is correct with respect to how the covered causes of loss affect commercial property insurance premiums?
If the policy provides Broad Form coverage, an additional rate is added to the Basic Form rates for the cost of covering the additional perils of the Broad Form.
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?
In some cases, the limit of insurance must be increased to cover the additional property values being insured.
Insurers underwrite Agreed Value optional coverage carefully for which one of the following reasons?
Insureds are often tempted to underinsure, knowing they will not suffer a coinsurance penalty when the agreed value option is in effect.
Which one of the following statements about Inflation Guard optional coverage of the Building and Personal Property Coverage Form (BPP) is true?
It is automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.
Which one of the following statements is correct with respect to the Value Reporting Form?
It requires the insured to periodically report property values to the insurer.
Which one of the following statements is correct with respect to the Control of Property condition of the Commercial Property Conditions Form?
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.
The inspections and surveys condition, a common policy condition attached to the ISO Commercial Package Policy, makes it clear that the insurer has the right to inspect the insured premises and
May recommend changes.
An endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period is referred to as a(n)
Peak Season Limit of Insurance endorsement.
Which one of the following statements is correct with respect to the Valuation condition of the Building and Personal Property Coverage Form (BPP)?
Subject to certain exceptions, insured property is valued at its actual cash value (ACV)
Which one of the following statements is true if the Replacement Cost optional coverage of the Building and Personal Property Coverage Form (BPP) is activated?
The amount of insurance required by the Coinsurance condition is calculated by multiplying replacement cost by the coinsurance percentage
Which one of the following statements is correct with respect to the Concealment, Misrepresentation, or Fraud condition of the Commercial Property Conditions Form?
The commercial property coverage part voids coverage if the insured conceals a material fact pertaining to the covered property.
Which one of the following statements is correct with regard to Loss Payment of the Building and Personal Property Coverage Form (BPP)?
The condition states that regardless of the value of the loss, the insurer will pay no more than the insured's financial interest in the covered property.
Which one of the following is correct with respect to the Vacancy condition of the Building and Personal Property Coverage Form (BPP)?
The conditions under which a building is considered to be vacant are different for a tenant than for an owner.
Which one of the following statements is correct with respect to the Recovered Property condition of the Building and Personal Property Coverage Form (BPP)?
The insured has the option of taking the recovered property and refunding the loss payment to the insurer.
Which one of the following statements is correct with respect to premium determination for value reporting forms?
The insured pays an advance premium at the inception of the policy that is based on 75 percent of the limit of insurance
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
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 Spoilage Coverage endorsement to a commercial property policy?
The power outage must be caused by conditions beyond the insured's control.
Under the Legal Action Against Us condition of the Commercial Property Conditions Form, if the insured wishes to bring legal action against the insurer, he or she must do so within which one of the following timeframes?
Two years after the date on which the direct physical loss occurred
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?
Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs.
