Ch. 8 Commercial Property Insurance P&C

Which of the following would NOT be found in the Common Policy Declarations page of a Commercial Package Policy? A The insured's name and address B Exclusions C The inception and expiration date D The policy premium

B Exclusions The Declarations page of an insurance policy contains the information that adapts the policy to a specific insured and property. The Exclusions are provisions that apply to all policies and policyholders.

Which of the following is found in the Common Policy Declarations of the CPP? A The provision that the first named insured is responsible for all premiums B The deductible C The provision granting the insurer the right to make inspections of insured property D The insurer's cancellation right

B The deductible The deductible amount is shown on the Common Policy Declarations page. The other statements appear in the Common Policy Conditions.

Choose the false statement regarding the Value Reporting Form. A Reports may be filed either daily, weekly, monthly, or quarterly B The insured is only required to report up to 80% of value of the property C Late reporting or under-reporting will result in a penalty in the event of a loss D The insured pays an advance premium at the beginning of the policy period

B The insured is only required to report up to 80% of value of the property Reporting of 100% of values is required to guarantee that adequate insurance is being provided and charged.

Which of the following would NOT be found in the Common Policy Declarations page of a Commercial Package Policy? A The expiration date B The occurrence form C The mortgagee D The named insured

B The occurrence form The Declarations Page shows the Who, What, When, Where, and How Much regarding the insurance provided by the policy. An occurrence form is a separate form used for claim-filing.

Which of the following losses would the Building and Personal Property Coverage Form NOT pay on an actual cash value basis? A A loss of $2,500 or less to a building B A loss to appliances, whether attached or not C A loss to awnings and floor coverings D A loss to outdoor equipment or furniture

A A loss of $2,500 or less to a building A loss to the building of $2,500 or less would be paid at replacement cost, all others mentioned are paid at actual cash value.

Time Element is best defined as: A The requirements for either pre-certification or continuing education B The period between Notice of Loss and Payment of Loss C Fair Rental Value and Additional Living Expense D Business Income and Extra Expense Coverage Form

D Business Income and Extra Expense Coverage Form Time element losses are indirect losses covering loss of business income and extra expenses.

Which of the following would be included in the definition of Business Personal Property under the Building and Personal Property Coverage Form? A Business Personal Property of others rented to the insured B Stock on consignment held for sale by the insured C Accounts, bills, and currency of others on the premises in the insured's trust D Furniture and machinery owned by the insured

D Furniture and machinery owned by the insured

Under the Building and Personal Property Coverage Form, a limit of how much is applied to business personal property temporarily away from the premises. A $15,000 B $5,000 C $2,500 D $10,000

D $10,000 The limit applies to property at a location not owned, leased, or operated by the insured, such as at a fair, trade show, or exhibition.

Which of the following is true regarding the Broad Form under the Commercial Property policy? A After 60 days of vacancy, coverage for glass breakage is suspended B The water damage coverage includes sewer backup C Water damage coverage includes repair of broken or ruptured plumbing D It provides limited coverage for fungus, wet or dry rot, and bacteria up to $25,000

A After 60 days of vacancy, coverage for glass breakage is suspended If, at the time of loss, the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss, there is no coverage for loss resulting from the following six perils: vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft, glass breakage, or water damage.

Which of the following is correct concerning the Commercial Property Special Causes of Loss Form? A Coverage is provided for all losses except as specifically limited or excluded B Coverage is included for loss of Business Income C Other than coverage for some additional perils, the coverage is identical to that of the Broad Form D Coverage is included for the peril of Earthquake

A Coverage is provided for all losses except as specifically limited or excluded The Special Cause of Loss form provides 'open perils' coverage. Beyond the expanded list of covered perils, it provides some additional coverage extensions, and coverage sublimits.

A commercial property has a $400,000 Commercial Building and Personal Property policy, and a fire breaks out on the loading dock, causing $80,000 in damage and $20,000 in debris removal. What is the maximum that may be received for the damage? A $80,000 B $100,000 C $400,000 D $90,000

B $100,000 The $80,000 loss plus the entire $20,000 debris removal will pay, since that amount is less than the 25% of coverage limit.

A Building and Personal Property Coverage Form will pay up to what percentage of the building coverage for debris removal? A 15% B 10% C 25% D 5%

C 25% The policy will pay up to a maximum of 25% of the coverage applying to the loss, and in the event of a total loss, the policy will pay up to an additional $10,000 for debris removal.

Under the Commercial Building and Personal Property Coverage Form, the building is considered vacant, unless at least what percentage of the square footage is rented or is used to conduct operations? A 51% B 41% C 31% D 61%

C 31% A completed building is considered vacant unless at least 31% or more of the total square footage is rented or is used to conduct operations.

Under the Commercial Property policy, vacancy is allowed for how many days before the peril of vandalism coverage is suspended? A 120 B 90 C 60 D 30

C 60

Under the Business Income form, the period of restoration begins how many hours after the time of loss? A 48 hours B 120 hours C 72 hours D 96 hours

C 72 hours The period of restoration ends on the date the property is repaired, or the date the business resumed at a new location, whichever is earlier.

Which of the following is not a common policy condition on a commercial property policy? A Premiums B Transfer of Rights and Duties C Abandonment D Inspection and surveys

C Abandonment The Abandonment provision is found in the conditions section of the Commercial Property Coverage Part, but is not a common policy condition under the CPP.

The Commercial basic Cause of Loss Form does not cover which of the following perils? A Sprinkler leakage B Sinkhole collapse C Earth Movement D Smoke

C Earth Movement Earth movement is an exclusion on the Basic Cause of Loss Form.

Following a large fire that requires several weeks of down time due to rebuilding, the Business Income Coverage Form will pay for: A Property that is spoiled because of loss of utility service B Gross income, less taxes C Net income plus continuing expenses of the business D Property that is not covered under the Building and Personal Property Coverage Form

C Net income plus continuing expenses of the business The formula of net income plus continuing expenses is intended to restore the insured as nearly as possible to his/her income status before the loss.

All of the following are additional coverages under the Building and Personal Property Coverage Form, except: A Preservation of property B Debris removal C Peak season D Fire department service charge

C Peak season If desired, peak season coverage must be added by endorsement.

Under the Common Policy Conditions of the CPP, which of the following is true regarding inspections and surveys? A Inspections or surveys must be made prior to the policy effective date B The insurer may conduct inspections and surveys only during the first 90 days of the policy period C The insurer has the right, but is not obligated, to conduct inspections and surveys at any time D The insurer has the obligation to conduct inspections and inform the insured if the property has serious hazards

C The insurer has the right, but is not obligated, to conduct inspections and surveys at any time Inspections and surveys are an effective underwriting tool of the insurer. They may be made whenever the insurer thinks necessary.

When would a person purchase a value reporting form? A When the insured is concerned about the Ordinance or Law exclusion B When the insured is insuring buildings or structures only C When an insured has business personal property values that fluctuate, and needs protection for the values actually at risk D When the insured is insuring property that has a relatively constant value

C When an insured has business personal property values that fluctuate, and needs protection for the values actually at risk With the value reporting form, the insured makes either daily, monthly, or quarterly reports of the values at risk. The final policy premium is based on the average values reported and the premium is adjusted at the end of the policy term.

Choose the correct statement regarding preservation of property under the Building and Personal Property coverage form. A It provides the same coverage as the preserved property would be insured against by the attached Causes of Loss Form B It provides off-premises coverage from covered perils at any time the policyholder is temporarily away from the premises C It stipulates how insured property must be protected when endangered by a covered peril D It provides open perils coverage for 30 days on insured property being moved or temporarily stored at another location because of the endangerment of a covered peril

D It provides open perils coverage for 30 days on insured property being moved or temporarily stored at another location because of the endangerment of a covered peril The purpose of the preservation of property additional coverage is to provide open perils coverage for property being moved because it is endangered, and to protect the property while it is removed from the premises for this reason. The property is covered for up to 30 days of removal.

Which of the following is designed to cover the risk of a business that experiences a specified increase in business personal property during a designated period? A Value Reporting Form B Agreed Value Coverage C Inflation Guard Coverage D Peak Season Endorsement

D Peak Season Endorsement The peak season endorsement is available for businesses that have an annual buildup of inventory during their peak season.

Which of the following is not a covered peril under the Basic Cause of Loss Form? A Earthquake B Sprinkler leakage C Sinkhole collapse D Volcanic action

A Earthquake The Basic Causes of Loss Form generally covers the same limited perils as the Basic Dwelling Form, with the addition of Sprinkler Leakage, Vandalism, and Sinkhole Collapse.

Which coverage form may not be added to the Commercial Property Coverage Part? A Homeowners Special Form B Legal Liability Coverage Form C Building and Personal Property Coverage Form D Commercial Builders Risk Coverage Form

A Homeowners Special Form The CPP is designed for Commercial insureds only. Personal lines policies are not eligible for inclusion.

Which of the following is true regarding the Earthquake Cause of Loss Form? A It can be used by itself to provide a stand alone Earthquake policy B It includes coverage for earthquakes that start within 168 hours after the expiration of the policy C It can be used only with another Causes of Loss Form D It provides coverage for mudslides Good Job! The Earthquake Causes of Loss Form cannot be used alone to provide an Earthquake policy. It is intended only to add the Earthquake peril to one of the other Causes of Loss Forms.

A It can be used by itself to provide a stand alone Earthquake policy The Earthquake Causes of Loss Form cannot be used alone to provide an Earthquake policy, same with volcanic eruption. It is intended only to add the Earthquake peril to one of the other Causes of Loss Forms.

The Extra Expense Coverage Form covers: A Necessary expenses incurred during the period of restoration B Expense of removing the debris of a covered direct loss C Expense of disposing of spoiled merchandise caused by a power outage D Loss of business income during the period of restoration

A Necessary expenses incurred during the period of restoration The principal function of the Extra Expense Coverage Form is to reimburse the insured for expenses incurred in getting back into business as soon as possible after a loss.

Which of the following is true regarding Property Off Premises coverage under the Building and Personal Property Coverage Form? A Property in a motor vehicle or in the care, custody, and control of a salesperson is included B It is offered as an Additional Coverage C There is a coverage limit of $5,000 on Property Off Premises D Property Off Premises is covered only for 30 days after its removal from the premises

A Property in a motor vehicle or in the care, custody, and control of a salesperson is included The coverage extension for property off premises provides up to $10,000 of coverage for the insured's covered property (other than stock) while it is temporarily at a location the insured does not own, lease, or operate. This includes property located at a fair, trade show, or exhibition; in or on a vehicle; or in the care, custody, or control of the named insured's salesperson.

Which of the following conditions under a Building and Personal Property Coverage Form determines how losses will be paid? A Valuation Clause B Loss Conditions C Deductible D Appraisal

A Valuation Clause The Valuation Clause sets forth the method of evaluating losses, and treats valuation of unusual property such as stock that has been sold, glass, outdoor equipment, and valuable papers.

der the Building and Personal Property Coverage Form, coverage applies to all of the following, except: A Windstorm damage to outdoor signs not attached to the building B Personal property used to service and maintain the building C A tenant's interest in a built-in wall cabinet D Materials that are within 75 feet of the premises

A Windstorm damage to outdoor signs not attached to the building

Which endorsement is the best choice to cover a store's holiday inventory? A peak season B excess inventory C fluctuating inventory D brands and labels

A peak season

Under the Builders Risk Coverage Form, all of the following are true, except: A There is no vacancy provision in the Commercial Builders Risk Coverage Form B Coverage includes trees, plants, outside antennas and signs that are not attached to the building C Coverage on the structures under construction includes materials, supplies, and equipment intended to become a permanent part of the building D Coverage terminates 90 days after completion, or when the building is occupied

B Coverage includes trees, plants, outside antennas and signs that are not attached to the building The coverage of the Builders Risk Coverage Form is intended to apply only to the structures under construction, and the materials intended to become a part of the structure, and temporary structures used in the construction. Coverage for outside property is available under the Building and Personal Property form.

Under the Common Policy Conditions of the Commercial Package Policy the insurer does not have the right to do which of the following? A Inspect the insured property B Examine the insured's records at any time up to 5 years after the policy expiration C Require written consent of insurer before the insured's rights can be transferred D Cancel the policy

B Examine the insured's records at any time up to 5 years after the policy expiration The time limit for inspection of books and records is 3 years following policy termination.

Which of the following is not included in the Personal Effects and Property of Others Extension under the Building and Personal Property Coverage Form? A Personal property of others in the insured's care B Loss by theft of personal effects C Personal effects owned by the insured D Personal effects owned by any partner or member of the insured

B Loss by theft of personal effects Personal effects of the insured, and of others that is in the insured's care, custody, or control, are covered up to $2,500. Coverage does not include loss by theft.

The Basic Causes of Loss Form under the Commercial Property Coverage Part would not cover which of the following? A Sprinkler leakage B Steam boiler explosion C Sinkhole collapse D Riot or civil commotion

B Steam boiler explosion

Which statement is correct concerning the Agreed Value optional coverage under the Building and Personal Property Coverage Form? A Agreed Value coverage requires coinsurance of at least 90% B The Agreed Value is the amount of loss agreed upon by the insurer and the adjuster C Agreed Value coverage suspends the coinsurance requirement D Agreed Value coverage eliminates the deductible in loss payment

B The Agreed Value is the amount of loss agreed upon by the insurer and the adjuster The Agreed Value optional coverage is used when insuring rare or unusual property, the value of which is difficult or impossible to determine. The coinsurance clause is suspended when this optional coverage applies. The insured and insurer agree on a value specified on the Declarations page.

Which of the following statements about the CPP is incorrect? A The first named insured is responsible for the payment of all premiums B The insured's rights and duties may be transferred to another party without insurer approval C The first named insured may cancel the policy by mailing advance written notice of the cancellation D The insurer may examine the insured's books and records at any time during the policy period

B The insured's rights and duties may be transferred to another party without insurer approval The insured's right and duties cannot be transferred without the written consent of the insurer.

Which of the following statements about the CPP is incorrect? A Changes in the terms of the policy can be made only by an endorsement issued by the insurer B The insurer has the obligation to perform safety inspections C The insurer may examine or audit the insured's books any time during the policy period, or within 3 years after the policy ends D The first named insured is the payee of any return premiums

B The insurer has the obligation to perform safety inspections The insurer has the right, but not the obligation, to inspect the property. These surveys are for underwriting and rating purposes, not safety inspections.

Which statement is false regarding the Building and Personal Property Coverage Form? A Coverage does not apply to money or securities B The standard deductible is $100 C If either the insurer or the insured submits a written demand for appraisal, each will choose and pay for his or her own appraiser D The Peak Season Endorsement can be provided for a specified increase for a certain period

B The standard deductible is $100 The standard deductible is $500.

he Condominium Commercial Unit-Owners Coverage Form does not cover which of the following? A Business personal property B Appliances C Building exterior wall D Improvements

C Building exterior wall The exterior wall is part of the common property covered by the Condominium Association Coverage Form.

All of the following are correct in regards to Extra Expense coverage, except: A It includes costs to equip a temporary location B It covers necessary expenses incurred during the period of restoration that would not have occurred if there had been no direct physical loss C Extra Expense coverage cannot be included in the Business Income Coverage Form D It is considered to be a Time Element Coverage

C Extra Expense coverage cannot be included in the Business Income Coverage Form

Which of the following property may be covered under a Building and Personal Property Coverage Form? A Personal property that is covered elsewhere B Personal property while waterborne C Grain stored inside a building D Vehicles licensed for road use

C Grain stored inside a building Hay and grain are covered inside a building, but not outside.

All of the following are coverage extensions under the Building and Personal Property Coverage Form, except: A Outdoor property B Newly acquired or constructed property C Inflation guard D Personal effects and property of others

C Inflation guard Inflation Guard is an optional coverage, not a coverage extension.

Endorsements that coordinate CPP coverages to avoid duplication are called: A Special B Coordinating C Interline D Panel

C Interline Interline endorsements coordinate coverage contained in one coverage part of the policy with another coverage part.

Under the Commercial Property policy, debris removal and fire department service charge coverage are examples of: A Optional coverages B Endorsements C Exclusions D Additional Coverages

D Additional Coverages

Choose the true statement regarding the Value Reporting Form. A The final premium is based on the values reported in the last report of the policy term B The form may be attached to any Commercial Property coverage forms C The Value Reporting Form contains an 80% coinsurance clause D Late reporting or under-reporting will result in a penalty in the event of a loss

D Late reporting or under-reporting will result in a penalty in the event of a loss. The insured pays an advance premium at the beginning of the policy period. Reports are filed either daily, weekly, monthly, or quarterly. The final premium is based upon the average values reported and is determined at the end of the policy year. The form may be attached to the Building and Personal Property Form and the Condominium Commercial Unit-Owners Form. The insured is required to report 100% of values with each report. Late reporting or under- reporting will result in a penalty in the event of a loss.

Choose the property that is not settled on a replacement cost basis under the Building and Personal Property Coverage Form. A Stock held for sale that is shown on the Declarations B The insured's business personal property C The building listed in the Declarations D Personal property of others

D Personal property of others Property of others is valued on an Actual Cash Value basis, unless otherwise specified.

Which statement is false regarding the Building Personal Property Coverage Form? A The optional agreed value coverage negates the coinsurance clause B There is no coverage for automobiles that are held for sale C The optional inflation guard coverage automatically increases the face amount of the policy D Preservation of Property Coverage provides named-perils coverage for 10 days

D Preservation of Property Coverage provides named-perils coverage for 10 days Preservation of Property is provided on an open perils basis for a maximum of 30 days.

Which of the following is not a cause of loss form used with the Commercial Property Coverage Part? A Broad B Special C Basic D Standard

D Standard There are three Causes of Loss Forms: The Basic Form covering basic named perils; The Broad Form covering broad named perils; and the Special Form, which is an open perils form.

Which statement about commercial property policies is not correct? A The first named insured is the payee of any return premiums B The insurer may examine or audit the insured's books any time during the policy period, or within 3 years after the policy ends C Changes in the terms of the policy can be made only by endorsement issued by the insurer D The insurer has the obligation to inspect the property

D The insurer has the obligation to inspect the property The insurer has the right, but not the obligation, to inspect the property.

Which is true of the Personal Property of Others coverage provided by the Building and Personal Property Coverage Form? A The policy covers the property of others against loss by theft B The policy covers the interest of others in property that the insured is purchasing on an installment plan C Property of others is covered at up to $5,000 per described location. D The policy covers property of others that is in the care, custody, and control of the insured

D The policy covers property of others that is in the care, custody, and control of the insured This coverage extension insures personal effects of the insured and the personal property of others in the insured's care, custody, and control for up to $2,500 at each described premises. Coverage does not include loss by theft.

Which statement is false about Commercial Property insurance? A The Builder's Risk Reporting Form insures a building under construction for an amount that increases with the increasing value of the building B The Condominium Association Form will cover refrigerators, air conditioners and cooking ranges that are owned by the named insured C Loss of commissions due to interruptions of a manufacturing business is a time element loss D Time element losses and direct losses are the same

D Time element losses and direct losses are the same Time element losses are indirect losses, not direct losses.