4- A Commercial Property_Revised
What are optional coverages and endorsements of the Commercial Property policy?
-Agreed Value Coverage (Coinsurance waived) -Inflation Guard -Replacement Cost (Doesn't apply to property of others on the insured premises. When damages occur, ACV is paid up front; remainder is paid once property repair / replacement has been made). -Value Reporting (Insured purchases insurance limit to cover the highest property value expected that year and submits a "value report" every month of the actual propery value) *BPP Forms indemnify losses for these coverages on an ACV basis
What are Building and Personal Property Exclusions?
-Currency, bills, accounts, evidences of debt, securities, food stamps, and bullion. -Animals (unless owned by others and boarded by the policyholder). -Automobiles held for sale. -Bridges, roads, patios, walkways or other paved surfaces. -Contraband or property being illegally transported or traded. -The costs associated with excavatios, filling, or grading. -Foundations of buildings or structures, machinery or boilers if such foundations are below ground or lower than the lowest basement floor. -Outdoor radio and TV antennas or masts and associated wiring. -Underground pipes or drains. -Fences, wiring, and masts. -Outdoor signs not attached to buildings. -Trees, shrubs, plants.
What are some Builders Risk Extensions?
-Debris Removal -Fire Dept Svc Charges -Pollutant Cleanup and Removal -Preservation of Property -Scaffolding, Construction Forms, and Temporary Structures (only while property is on the insured premises) -Property at other locations ($10K) -Property in Transit ($25K) -Sewage Backup ($5k)
What are common additional coverages of the Commercial Property policy?
-Debris removal (25% of total claim for PD; add'l $25K if PD plus debris removal exceeds policy limit OR debris removal expense exceeds the 25% limit) -Pollution Clean-Up and Removal (pays up to $10K; insured must report loss within 180 days), -Preservation of Property / Removal Coverage (property is covered for ANY cause of loss during removal and storage at another location; coverage lasts up to 30 days), -Fire Department Service Charge (no deductible applies), -Increased Construction Costs (limit is the smaller of either $10K or 5% of Coverage A limit; only applies to bldgs insured on RC basis, -Electronic Data (Loss includes viruses or malicious code unless introduced by the insured employees; limit is $2,500 per year; limit does NOT apply to data used to operate elevators, lighting, heating, ventilation, a/c, or security systems.
What are universal exclusions to the Commercial Policy?
-Loss caused by enforcement of building ordinances with regulate construction, use, or repair of property. -Earthquakes or land movement. -Seizure or destruction by governmental action or authority. -Nuclear reaction, radiation and associated radioactive contamination hazards. -Loss resulting from utility services failures. -War. -Flood, mudslides, the rising of water, or backup of water through sewage pipes or drains. -Damages to wiring or devices caused by artificially generated electrical current. -Explosion of boilers, steamers, pipes and engines (available but requires endorsements)
Universal Exclusions of Commercial Property Exclusions
-Loss due to enforcement of bldg ordinances regulating construction, use, or repair of property -Earthquakes or land movement -Seizure or destruction by gov't or authority -Nuclear reaction, radiation, and associated radioactive contamination hazards -Loss resulting from utility services failures -War -Flood, rising water, mudslides and backup of water through sewage pipes or drains -Damages to wiring or devices caused by artificially generated electrical current -Explosion of boilers, steamers, pipes and engines (available by endorsements)
What coverage extensions are available for the Commercial Property policy?
-Newly Acquired Property (Includes new bldgs under construction on insured premises and newly acquired properties off-premises. There is 30 days of coverage; $250K coverage for bldgs and structures) -Property Off-premises ($10K for covered property temporarily off-premises; excludes property that is off-premises to be sold) -Personal Effects (Up to $2,500 for damage / destruction of personal belongings; loss must occur on the insured premises) -Valuable Papers (Up to $2,500 for recovery / replacement of valuable papers / computer records; doesn't cover money and securities) -Outdoor Property (Covers damage to TV / Radio antennae, detached signs, and trees, plants, or shrubs. Limit: $1K; Limit for trees, plants, and shrubs: $250 per unit; Covers fire, lightning, explosion, riot, civil commotion, and aircraft damage. -Non-owned Trailers (Covers damage to non-owned trailers beign used on premises; Limit: $5K; only covered if trailer is not attaced to a vehicle; only covered if insured is contractually responsible for damages to the non-owned trailers
What are the two categories of "Extra Expenses"?
-True extra expenes to avoid or minimize the halt in business operations (e.g., subcontracting work, relocation expenses, rental of generators to run power at a damaged property, leasing & rentals to continue a disrupted business) -Expediting expenses: the cost of repairing or replacing property in order to get the business going again (this is only covered to the extent that it reduces the amt of income lost)
How is net income calculated?
1.) Total Revenue - Cost of Goods Sold = Gross Income 2.) Gross Income - Operatiing Expenses = Net Income
How muh coinsurance must be maintained for policyholders to add coverage extensions?
80% (the coverage extensions are not subject to policy limits)
Extended coverage under a commercial policy often provides coverage for damage to outdoor trees, plants, and shrubs. When covered, what is the maximum per-plant amount? A. $250 B. $200 C. $100 D. $50
A. $250
A fire in John's factory causes him to shut the doors for 90 days. While repairs take place, John rents another building, along with some machinery and manufacturing supplies, for $90,000. John's total loss is $300,000, but by renting the new building and equipment he manages to reduce that loss by $50,000. Assuming John's commercial property policy provides Business Income Coverage Without Extra Expense, how much will his insurer indemnify him? A. $300,000 B. $210,000 C. $260,000 D. $50,000
A. $300,000
"Permanently installed fixtures" would fall under which coverage of a commercial property policy? A. Building and Structures B. Personal Property of Others C. Preservation of Property D. Business Personal Property
A. Building and Structures
XYZ Carpet Manufacturing's main factory burns down during the night due to faulty electrical wiring. No longer able to manufacture carpeting, XYZ Carpet faces a serious cash flow dilemma. Which insurance coverage might help pay XYZ Carpet's bills while the factory is repaired? A. Business Income coverage B. Control of Property coverage C. Preservation of Property coverage D. Builders Risk coverage
A. Business Income coverage
XYZ Computer's production building for circuit boards is struck by lightning, which results in a fire that burns down the entire facility. XYZ Computer cannot continue the production of computers until the facility is rebuilt. Which insurance coverage might indemnify XYZ Computer for lost revenue until a new facility is built? A. Business Interruption B. Extra Expense C. Builders Risk D. Leasehold Interest
A. Business Interruption
In what part of a commercial property policy would you look to see if flood damage to your factory is covered? A. Causes of Loss Forms B. Declarations page C. Conditions page D. Coverage Forms
A. Causes of Loss Forms
If a Building and Personal Property Form has a Causes of Loss - Basic Form attached, which damages are NOT covered by this commercial property policy? A. Earthquake damage B. Damage caused by striking employees C. Smoke damage D. Damage caused by a non-owned airplane
A. Earthquake damage
Each insurance coverage in a commercial property insurance policy will contain a Causes of Loss form. Which of the following is NOT an example of a Causes of Loss form? A. General Form B. Basic Form C. Special Form D. Broad Form
A. General Form
The XYZ Company has an attached balcony on the top floor of their headquarters. During a summer storm, a lightning bolt strikes the metal railing of the balcony, splitting the balcony into two. XYZ Company would like to repair the balcony, but new building codes require more expensive construction materials. What commercial property coverage pays for this extra expense? A. Increased Construction Costs B. Extra Expense C. Newly Acquired Properties D. Preservation of Property
A. Increased Construction Costs
When Herb was just starting out in the textile business, he purchased an older factory building in order to acquire as much square footage as possible, for the lowest cost. After a massive storm blows the roof off the building, Herb finds that the structure will require massive upgrades to bring it up to code. Which endorsement to his commercial property policy can help with this added cost? A. Ordinance or Law B. Legal Liability C. Protective Safeguard D. Differences in Conditions
A. Ordinance or Law (The Ordinance or Law endorsement is designed to provide insurance protection for additional costs associated with repairing or rebuilding a facility damaged by a covered peril in order to comply to current building codes.)
Craig purchased some additional machinery for his business so that he can keep up with customer demand. The problem is that Craig does not have enough space for the newly purchased machinery. He rents a storage unit to house the machinery until he can bring it to the company, but when the storage unit burns down, Craig's equipment goes with it. Which coverage extension might indemnify Craig for his loss? A. Property Off-Premise B. Preservation of Property C. Outdoor Property D. Newly Acquired Property
A. Property Off-Premise
Matt, a real estate developer, must submit a report to his insurer every 30 days listing the value of all his properties over the past month. In turn, the insurer adjusts Matt's premiums based on the values he submits. Which optional coverage does Matt subscribe to? A. Value Reporting B. Optional Reporting C. Agreed Value D. Adjusted Income
A. Value Reporting
In a typical commercial property policy, an insured building is considered "vacant" when: A. for 60 days, the building is either closed or has less than 31% of its available square footage occupied. B. for 25 days, the building is either closed or has no business personal property located in the building. C. for 30 days, the building is either closed or has less than 61% of its available square footage occupied. D. for 45 days, the building is either closed or has no business personal property located in the building.
A. for 60 days, the building is either closed or has less than 31% of its available square footage occupied.
In a commercial property policy, Coverage C of the Building and Personal Property Coverage Form provides coverage for: A. personal property of others. B. liability and medical payments. C. business personal property. D. buildings and structures.
A. personal property of others.
In a commercial property policy, the Monthly Limit of Indemnity coverage option for Business Income insurance: A. requires an insured to parcel the stated policy limit into a fractional maximum amount of coverage available per month during the period of restoration. B. automatically raises the policy limit every month, to protect against the effects of inflation. C. requires the insured to maintain at least an 80% level of coinsurance on the insured property. D. establishes a separate aggregate limit for each month of the entire policy period.
A. requires an insured to parcel the stated policy limit into a fractional maximum amount of coverage available per month during the period of restoration.
A storm travels through town, partially destroying Wilma's business. Wilma maintains a Business Income coverage policy with $120,000 limit, and the Monthly Limit of Indemnity coverage option. Wilma's business incurred the following expenses: Monthly Expenses Month - Amount Month 1 - $29,000 Month 2 - $36,000 Month 3 - $24,000 Month 4 - $31,000 How much would her policy pay for lost income if Wilma had a monthly limit of 1/4 in place? A. $129,000 B. $113,000 C. $136,000 D. $120,000
B. $113,000 ($29K for Month 1, $30K for Month 2, $24K for Month 3, and $30K for Month 4)
The Newly Acquired Property extension in a commercial property policy provides ________ in coverage for buildings under construction at the insured premises, or for any newly acquired business property off the insured premises. A. $50,000 B. $250,000 C. $100,000 D. $1 million
B. $250,000
A storm travels through town, partially destroying Wilma's business, which is covered by a commercial property policy. Wilma maintains Business Income Coverage with a $100,000 limit, and the Maximum Period of Indemnity coverage option. Wilma's business incurred the following losses: Monthly Losses Month - Amount Month 1 - $19,000 Month 2 - $16,000 Month 3 - $14,000 Month 4 - $11,000 Month 5 - $6,000 How much would her policy pay for lost income? A. $100,000 B. $60,000 C. $120,000 D. $66,000
B. $60,000 ($19K for Month 1, $16K for Month 2, $14K for Month 3, $11K for Month 4) Maximum Period of Indemnity maxes out at 120 days
In the Business and Personal Property Form of a commercial property policy, Coverage A - Buildings and Structures coverage would apply to which of the following features of a commercial enterprise? A. A small copy machine in the break room B. A 40-ton printing machine affixed to a factory floor C. A briefcase left in the lunchroom by a client D. A leased mainframe computer
B. A 40-ton printing machine affixed to a factory floor
Argo Sciences Inc. wants to build a new testing laboratory for their line of chemicals. They want insurance coverage to protect their insurable interest in the building and materials while under construction. What commercial property coverage might Argo Sciences Inc. purchase to protect their new facility while it's under construction? A. Preservation of Property B. Builder's Risk coverage C. Extra Expense coverage D. Business Income coverage
B. Builder's Risk coverage
While working on a customer's industrial copier in the repair facility, an employee at RZJ Electronics Repair accidentally destroys the copier, causing $3,000 in damage. What commercial property coverage might apply? A. Extra Expense coverage B. Legal Liability coverage C. Business Interruption coverage D. Employees Personal Property coverage
B. Legal Liability coverage
Ben owns a souvenir shop in a small town. During the winter time, the population consists of about 2,000 locals, but once the summer season hits, it's a mad-house. The island can see over a million travelers during the summer season, and Ben must be ready with enough inventory to handle the demand. Which endorsement to his commercial property policy could temporarily increase Ben's coverage limits during this high-volume time? A. Legal Liability B. Peak Season C. Protective Safeguard D. Tourism Endorsement
B. Peak Season
Which of the following terms refers to the time elapsed between a covered loss to a commercial building and the return to full business operations of the same building? A. Period of Construction B. Period of Restoration C. Period of Indemnity D. Property Preservation Window
B. Period of Restoration
Frank's computer store lies in the direct path of a rapidly approaching wildfire. In an attempt to diminish possible damages, Frank loads his most valuable computers into a truck and drives them to a remote storage facility. However, as he is unloading the computers, someone hijacks his truck and steals all of the merchandise still inside. What commercial property coverage would indemnify Frank for the theft of the computers? A. Electronic Data B. Preservation of Property C. None D. Extra Expense
B. Preservation of Property
James owns a metal machining shop where he does contract work for local mechanics, manufacturing hard-to-find parts or custom fittings. Being a cautious man, James wants commercial property insurance that provides coverage on an open-peril basis. Which Causes of Loss Form would best suit James' needs? A. Universal Form B. Special Form C. Basic Form D. Broad Form
B. Special Form
When a fire burns through The Chronicle newspaper company, it takes out two permanently installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered by the BPP form under Coverage C - Personal Property of Others? A. The printing presses and fire extinguishers B. The employees' personal laptops C. The printing presses and newspaper stock D. The rolls of newspaper stock
B. The employees' personal laptops
When a fire burns through The Chronicle newspaper company, it takes out two permanently-installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered by the Building & Personal Property form under Coverage C - Personal Property of Others? A. The printing presses and fire extinguishers B. The employees' personal laptops C. The printing presses and newspaper stock D. The rolls of newspaper stock
B. The employees' personal laptops
When Bill's business is interrupted because of a fire, he must provide a profit and loss statement to his insurer so they can determine an accurate amount of indemnification. Which three core elements from the profit and loss statement are used to calculate the net income? A. Operating expenses, inflation, cost of goods sold B. Total revenue, cost of goods sold, operating expenses C. Inflation, depreciation, cost of goods sold D. Total revenue, inflation, operating expenses
B. Total revenue (from sales & svcs provided), cost of goods sold (cost of materials and labor associated directly with sales and svcs), operating expenses (cost of payroll and other administrative needs)
Veronica is in the process of building an extra structure for the sole purpose of kiln firing her pottery. After 40 days of waiting for it to be completed, she decides to go ahead and begin using it, since the kiln is already set up, even though the interior drywall isn't completely finished. Her Builder's Risk Coverage Form is then terminated because: A. interior drywall isn't covered under a Builder's Risk Coverage Form. B. Veronica has now put the building to its intended use. C. Builder's Risk policies are only good for 30 days. D. the risk of fire voided the policy.
B. Veronica has now put the building to its intended use.
Broad Form Perils
Basic Form Perils, breakage of glas, falling object, weight of ice snow and sleet, water damage from sources other than sprinkler leakage, additional collapse coverage if caused by: any covered perils listed in the policy; hidden decay, hidden insect or vermin damage; weight of people, personal property, or rain collecting on a rooftop; use of defective materials or construction methods, but only if occuring during a period of construction or remodeling.
Tom leaves his personal laptop at Smith & Co. so a colleague can work on a presentation. While the laptop is in the care of Smith & Co., it is destroyed by a fire in the break room. The laptop was worth $3,200. How much indemnification would Smith & Co.'s Business and Personal Property Form provide for the damaged laptop? A. $0 B. $700 C. $2,500 D. $3,200
C. $2,500 (Smith & Co.'s BPP coverage includes the personal property of others that is in Smith & Co.'s care, custody, or control while it is in (or within 100 ft. of) a covered building. This coverage normally has a $2,500 sublimit.
A fire in John's factory causes him to shut the doors for 90 days. While repairs take place, John rents another building, along with some machinery and manufacturing supplies, for $90,000. John's total loss is $300,000, but by renting the new building and equipment he manages to reduce that loss by $50,000. Assuming John's commercial property policy includes Business Income Coverage With Extra Expense, how much will his insurer indemnify him? A. $420,000 B. $300,000 C. $340,000 D. $120,000
C. $340,000 (John was able to reduce his total loss by $50,000, making his total loss $250,000. The extra expense of the equipment ($90,000) is then added to the total loss ($250,000) giving us a total loss, with extra expenses, of $340,000)
Acme Boats experiences a devastating fire in their factory. They turn to their Business Income coverage to recover their loss of income due to the fire. When Acme Boats initiated the policy, they chose the Maximum Period of Indemnity coverage option with a policy limit of $150,000. Acme Boats experienced the following loss of business income in the months after the fire: Monthly Income Losses Month - Amount Month 1 - $20,000 Month 2 - $20,000 Month 3 - $15,000 Month 4 - $15,000 Month 5 - $10,000 Month 6 - $10,000 How much money might Acme Boats be indemnified for the loss of business income? A. $40,000 B. $90,000 C. $70,000 D. $20,000
C. $70,000 (The Maximum Period of Indemnity coverage option pays for the actual loss to business income and any extra expenses incurred, but only up to a maximum of 120 days (approximately 4 months). So, add up the losses for months 1 through 4 and we come up with $70,000.)
Helen owns a manufacturing company. She maintains a commercial property policy that includes Business Income and Extra Expense coverage. One evening, a windstorm blows a tree through the side of her building, leaving a hole in the wall and damaging a production machine. When Helen has to rent another machine to keep her business in operation, how long will she have to wait before she can be indemnified for this indirect loss? A. 24 hours B. 72 hours C. 0 hours—Extra Expense coverage kicks in immediately D. 12 hours
C. 0 hours—Extra Expense coverage kicks in immediately
Veronica needs to expand her pottery business and add an extra building to her property for the sole purpose of kiln firing her pottery. She adds Builder's Risk coverage to her commercial property policy to cover the new structure (which is yet to be completed), and finds out she must carry: A. 125% coinsurance. B. 80% coinsurance. C. 100% coinsurance. D. 50% coinsurance.
C. 100% coinsurance.
In the Business and Personal Property Form of a commercial property policy, Coverage B - Business Personal Property coverage applies to all of the following EXCEPT: A. Leased office equipment B. Office furniture C. Commercial flooring D. Business stock
C. Commercial flooring
In a commercial property policy, the Building and Personal Property Form contains three coverages. Which of the following coverages is NOT a part of this form? A. Coverage C - Personal Property of Others B. Coverage B - Business Personal Property C. Coverage D - Loss of Use D. Coverage A - Buildings and Structures
C. Coverage D - Loss of Use
A fierce windstorm blows through town, stripping the shingles off of the roof and shattering all of the windows at Gradient Industries. What commercial property coverage might pay for the cost of cleaning up the shingles and broken glass? A. Legal Liability coverage B. Preservation of Property C. Debris Removal D. Increased Construction Costs
C. Debris Removal
ABC Paving owns a warehouse where they store all their pavers. Lightning strikes the warehouse, which burns to the ground and destroys the entire fleet of pavers. In order to complete the projects they are currently working on, ABC Paving has to lease four pavers from another company. What commercial insurance coverage might pay for this expense? A. Preservation of Property B. Legal Liability C. Extra Expense D. Order of Civil Authority
C. Extra Expense
Diana owns a manufacturing company. One evening, a windstorm blows a tree through the side of her building, leaving a hole in the wall and damaging one of her production machines. Diana temporarily fixes the hole with some plywood, but will have to rent a new production machine until hers is repaired. Which coverage in her commercial property policy could indemnify Diana for the cost of the machine rental? A. Profit & Loss Form B. Rental Equipment Coverage C. Extra Expense Coverage D. Operating Expense Coverage
C. Extra Expense Coverage
In a commercial property policy, Extra Expense Coverage provides indemnification to the policyholder for additional expenses incurred during which of the following time frames? A. From 72 hours after the initial damage until the business is up and running again B. From 72 hours after the initial damage until 72 hours before the business is up and running again C. From the point of initial damage until the moment the business is up and running again D. From the point of initial damage until 72 hours before the business is up and running again
C. From the point of initial damage until the moment the business is up and running again
John purchased some business property a few years ago. In the past two years, the property value has grown 4% each year. John maintains the 80% coinsurance requirement on his business policy, but wants a more automated coverage so he doesn't have to constantly check the appraised value of his property. Which optional coverage can John purchase to help ensure that he always has the right amount of coverage? A. Value Reporting B. Agreed Value C. Inflation Guard D. Appraisal Condition
C. Inflation Guard
Mackey Manufacturing signs a five-year lease at a new location, only to have the building burn down one year into their new lease. Now they have to lease a new property, and the rental prices have increased, so the company now has to pay higher rental costs. Which commercial property coverage form might indemnify Mackey Manufacturing for the difference in lease costs? A. Property Off-Premises Coverage Form B. None C. Leasehold Interest Coverage Form D. Preservation of Property Coverage Form
C. Leasehold Interest Coverage Form
Acme Insurance is trying to attract new commercial clients, so they decide to broaden coverage for business personal property items without increasing the premium. Which condition would allow the current clients of Acme Insurance to benefit from the newly expanded coverage? A. Policy Period B. Changes in Policy C. Liberalization D. Control of Property
C. Liberalization
Jim has several trailers in the supply yard of his business which belong to his respective buyers. Jim's business loads the trailers and then contracts with another company to ship the goods to their final destination. One day while loading up a trailer, Jim accidentally pierced the side of a covered trailer with his forklift. The damage to the trailer would be covered by the _____________ coverage extension. A. Newly-Acquired Property B. Outdoor Property C. Non-Owned Detached Trailers D. Property of Others
C. Non-Owned Detached Trailers
ABC Computers experiences a fire overnight at their corporate offices. ABC Computers had purchased an older building to house their offices, and the repair costs include upgrading the old building to adhere to modern fire codes. Which coverage might indemnify ABC Computers for the added expense of these upgrades? A. Legal Liability coverage B. Builders Risk coverage C. Ordinance or Law endorsement D. Extra Expense coverage
C. Ordinance or Law endorsement
When a gas line explodes close to Georgia's business, it destroys most of her landscaping, leveling trees and uprooting shrubs. Which coverage extension could help cover the cost of replacing these plants? A. Property Off-Premise B. Shrubbery Endorsement C. Outdoor Property D. Property On-Premise
C. Outdoor Property
Ryan occasionally uses his new personal iPad at work to handle business matters since it's portable and can easily set up video conferences. He has a computer and another tablet at home, so he usually leaves the iPad at work, locked in his desk drawer. One morning Ryan arrives at work to find a massive sinkhole has opened up underneath the business, swallowing the interior. Which coverage extension in a commercial property policy may pay for Ryan's iPad? A. Newly Acquired Property B. None C. Personal Effects and Property of Others D. Property Off-Premise
C. Personal Effects and Property of Others
An overhead projector is taken to a conference room at a local hotel for a week. Sometime during the week, the projector falls off its stand and is destroyed. Assuming it is a covered loss, what commercial property coverage might cover the projector? A. Extra Expense B. Preservation of Property C. Property off Premise D. Valuable Papers and Records
C. Property off Premise
In a commercial property policy, Business Income Coverage would pay for which of the following expenses? A. Materials B. Cost of goods sold C. Rent D. Physical property damage
C. Rent (It would also pay for salaries, payments to the bank, utilities, taxes and administrative costs during the period of restoration)
A winter storm has left a lot of snow and ice on the roof of Helen's business. The weight is too much for the roof to bear and it gives way, bringing with it a torrent of melting ice and snow cascading down on the interior of Helen's warehouse. Her commercial property policy covers the damage, even though "weight of ice and snow" is not specifically listed as a covered peril. Therefore, which type of Causes of Loss form does Helen have attached to her Building and Personal Property Coverage Form? A. Basic Form B. Universal Form C. Special Form D. Broad Form
C. Special Form (The Special Form provides open-peril coverage, meaning it covers all known perils except for those specifically listed in the exclusions section, and "weight of ice and snow" is not excluded. The Basic Form doesn't list "weight of ice and snow" but it's a named-peril coverage, so its omission means this form doesn't cover this peril. The Broad Form covers this peril, but names it as a covered peril. There is no "Universal Form" for a commercial property policy.)
In a commercial property policy, Builders Risk coverage is sold based on which of the following values? A. The value of the land underneath the new construction B. The highest value of a building currently insured by the policyholder C. The value of the completed building D. The value of labor and materials used in construction
C. The value of the completed building (Builders Risk coverage is sold on the basis of the completed value of the building, and the insured must carry 100% coinsurance on the policy to receive full coverage for partial losses.)
When an insurer decides to not renew an existing commercial property policy, it is obliged to follow the Cancellation and Nonrenewal condition of supplying notice to the policyholder 45 days in advance. If the insurer fails to meet this deadline, it must: A. offer the same premium rates and policy coverage as before for an additional 3 months. B. offer an additional 30 days of coverage without charging any premium. C. offer the same premium rates and policy coverage as before for an additional 30 days. D. pay a fine of up to $5,000.
C. offer the same premium rates and policy coverage as before for an additional 30 days.
What is excluded from Business Income Coverage?
Cost of Goods Sold (this means any expenses that go into making or selling a product, including: Inventory, Labor, Materials, Supervision
Special Form (Open Perils)
Covers all known perils except for those listed in the exclusions sections, such as: wear and tear, rust and decay; smog damage or damage by release of pollutants; damage, other than collapse, caused by vermin infestation; settling or crackign bldgs; explosion of steam boilers; damagees that result from off-premises utility outage; dishonesty on the part of the insured or employees; losses to property left in the open rain, snow, or icy conditions; governmental intervention; errors or faults in planning, zoning, design, workmanship or materials; voluntary surrender of property; missing property.
Jeff's commercial property policy includes coverage for Fire Department Service Charge, with a limit of $500. When one of Jeff's business premises catches fire, he calls 911. The fire department arrives and puts out the fire, saving the majority of Jeff's business. Later that week, Jeff has to call the fire department again when another fire breaks out, this time at his second business location. When the bill arrives for the fire department's services, it shows a $600 fee for each call, totaling $1,200. Jeff files a claim with his insurer for the charges. How much of the bill will Jeff have to pay? A. $0 B. $700 C. $1,200 D. $200
D. $200
Frank found a "favorable lease" for his business two years ago at $10/sq.ft. per year. He ended up leasing a 20,000 sq.ft. space for 6 years to lock in that yearly lease of $200,000. Yesterday, Frank's business was struck by lightning and burned to the ground, forcing him to lease a new building. Unfortunately the going rate now is $15/sq.ft. and Frank still needs 20,000 sq.ft. of space. How much could Frank's Leasehold Interest Coverage pay for the additional costs of leasing a new space for the remaining 4 years? A. $1,200,000 B. $100,000 C. $300,000 D. $400,000
D. $400,000
Grace owns a high-end tea shop and, to improve the ambiance, has purchased some old antique furniture and statues. While these items have intrinsic value, it's difficult to assign them an actual cash value. Which type of coverage in her commercial property policy could help assign value to these items in the event of a loss? A. Value Reporting B. Inflation Guard C. Replacement Cost D. Agreed Value
D. Agreed Value
A fire breaks out in Anton's manufacturing plant, causing extensive damage which will take at least three months to repair. In the meantime, Anton has rent and employees who still need to be paid, and many other expenses that can't wait until the business is up and running again. Which coverage form of his commercial property policy can help Anton with his cash flow? A. Builder's Risk Coverage B. Manufacturer's Risk Coverage C. Rent, Salary, and Repair Coverage D. Business Income Coverage
D. Business Income Coverage
After a fire burns through XYZ Condominiums, they have to replace most of the interior. Which of the following WILL be covered under the Condominium Coverage Form of the condo association's commercial property policy? A. Computers used by one of the commercial units B. Upgrades within individual condos C. Personal property of a commercial unit D. Computers used by the condo as a whole
D. Computers used by the condo as a whole
Cyril recently purchased a small machining shop. When asked on his commercial property insurance application about how the property will be heated in the winter, he replies "central heat," when in fact it will be heated by a wood stove. Under which condition could the insurer deny coverage? A. No Benefit to Bailee B. Changes to the Policy C. Control of Property D. Concealment, Misrepresentation, and Fraud
D. Concealment, Misrepresentation, and Fraud
When a fire destroys a car parts manufacturer in China, USA Motors finds itself without the necessary parts to build its vehicles. Which commercial property insurance coverage option could indemnify USA Motors from lost business due to the damages sustained by its Chinese supplier? A. Inflation Guard B. Order of Civil Authority C. Extra Expense Coverage D. Contingent Business Interruption
D. Contingent Business Interruption
William owns a paint store and employs Brent. One day, while Brent is decorating the window display, he gets carried away dancing to the music in his headphones, falls off his ladder, and smashes through the glass. What policy condition allows William to collect for the loss on his insurance contract? A. Subrogation B. Other insurance C. Liberalization D. Control of property
D. Control of property
Which of the following will NOT appear on the Declarations page of a commercial property policy? A. Address of the insured business B. Coverage limits C. Coverage deductibles D. Covered perils
D. Covered perils
A fire in the break room kitchen of Helen's small business spreads into the utility room, damaging the computer server. Her server is physically destroyed, along with a lot of vital information: client information, pending shipments, etc. Which coverage can help Helen with the costs associated with losing this information? A. Business Income B. Reasonable Repairs C. Records Recovery D. Electronic Data
D. Electronic Data
After a heavy hailstorm cut the power to Julia's bakery, she had to rent generators to keep her business going for a few days. Which of the following coverages in her commercial property policy would protect Julia the MOST in this situation? A. Business Income B. Contingent Business Interruption C. ACV valuation D. Extra Expense coverage
D. Extra Expense coverage
In a commercial property policy, the Business Income Coverage Form provides indemnification to the policyholder for the loss of income during which of the following time frames? A. From 72 hours after the initial damage until 72 hours before the business is up and running again B. From the point of initial damage until the moment the business is up and running again C. From the point of initial damage until 72 hours before the business is up and running again The Business Income form covers a company's loss of income due to a covered loss for a period beginning 72 hours after the loss until the business is running again. D. From 72 hours after the initial damage until the business is up and running again
D. From 72 hours after the initial damage until the business is up and running again
After a tornado completely destroys the roof and windows of Calah's business building, she finds that there are new codes in place requiring thicker shingles and reinforced window frames. Calah insured her business using a replacement cost policy. Which commercial property coverage can help Calah with the added costs of bringing her building up to code? A. Debris Removal B. Business Interruption C. Preservation of Property D. Increased Construction Costs
D. Increased Construction Costs
Which of the following is NOT true of the Replacement Cost endorsement to the Buildings & Structures Form of a commercial property policy? A. The policy still pays ACV up front, and then the remainder of the actual cost to repair or replace after the repair/replacement has been completed. B. It changes the loss settlement terms of the policy from ACV to RCV. C. It always requires the policyholder to meet at least an 80% level of coinsurance. D. It applies to both the insured property and any property of others on the insured premises.
D. It applies to both the insured property and any property of others on the insured premises.
Jim receives a letter in the mail from his insurer notifying him that his commercial policy will not be renewed thirty days from now. Jim protests, saying he needs at least two months time to find a new policy. Jim ends up receiving an additional 30 days' coverage at the same premium as before, because: A. Jim prepays his insurance two months at a time. B. Jim's insurer did not notify him by phone. C. Jim is an exceptional negotiator. D. Jim's insurer did not provide him with 45 days' notice.
D. Jim's insurer did not provide him with 45 days' notice.
Which of the following is NOT a universal commercial property policy exclusion? A. Warfare B. Floods C. Earthquakes and land movements D. Lightning
D. Lightning
Celina's business is growing and she needs more space for her inventory. A week ago, a crew started work on constructing a new building on Celina's business premises. Last night, a bolt of lightning set fire to the still-unfinished new building and burned it to the ground. Celina's property is fully insured under a commercial property policy. Which coverage extension in her policy would cover this loss? A. Personal Effects B. Property On-Premise C. Outdoor Property D. Newly Acquired Property
D. Newly Acquired Property
Helen's business is growing rapidly, so she decided to add an annex onto her office and hire another worker. A storm blows down most of the annex structure while it is under construction, forcing Helen to restart from scratch. Assuming she maintains the 80% coinsurance requirement on her commercial policy, which coverage extension could help Helen rebuild? A. Outdoor Property B. Reasonable Repairs C. Property Off-Premise D. Newly Acquired Property
D. Newly Acquired Property
Which commercial property Causes of Loss form offers open-peril (also called "all-risks") coverage? A. Basic form B. Broad Form C. All commercial insurance coverage is open peril D. Special form
D. Special form
When Shawn purposefully set fire to Jim's restaurant, Jim was covered under his commercial property policy. Which condition allows Jim's insurer to attempt to reclaim those damages from Shawn? A. Vandalism B. Legal Action Against the Insurer C. Misrepresentation D. Subrogation
D. Subrogation
When a fire burns through The Chronicle newspaper company, it takes out two permanently-installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered under Coverage A - Buildings and Structures? A. The printing presses only B. The employees' personal laptops C. The printing presses and newspaper stock D. The printing presses and fire extinguishers
D. The printing presses and fire extinguishers
When a fire burns through The Chronicle newspaper company, it takes out two permanently installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered under Coverage A - Building and Structures? A. The printing presses only B. The employees' personal laptops C. The printing presses and newspaper stock D. The printing presses and fire extinguishers
D. The printing presses and fire extinguishers (Coverage A covers the buildings as well as machinery fixtures, and equipments inside the building, if permanently installed (printing presses), and property used to maintain the business (fire extinguishers).
When a fire burns through The Chronicle newspaper company, it takes out two permanently installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered by the Building & Personal Property Form under Coverage B -Business Personal Property? A. The printing presses and newspaper stock B. The printing presses and fire extinguishers C. The employees' personal laptops D. The rolls of newspaper stock
D. The rolls of newspaper stock
After a fire burns through XYZ Condominiums, they have to replace most of the interior. Which of the following will NOT be covered under the Condominium Coverage Form of the condo association's commercial property policy? A. Computers used by the condo B. The common areas of the condo building C. Piping, ductwork, or wire units D. Upgrades within individual condos
D. Upgrades within individual condos
Thomas runs a computer repair shop. One morning he arrives to find the front glass window broken and a number of his customers' computers stolen. Thomas' Legal Liability Coverage Form would pay for: A. the cost of replacing the front window. B. Thomas' own personal computer. C. cash taken from the register. D. his clients' computers.
D. his clients' computers.
Basic Form Perils
Fire Lightning Windstorm or Hail Explosion, not including ruptures caused by high pressure devices or boilers Smoke damage Vandalism and Malicious Mischief (not theft or glass breakage) Aircraft or Vehicle Collision Riot or Civil Commotion, including damage caused by striking employees Sprinkler leakage Sinkhole Collapse Volcanic Activity
When does the Period of Restoration begin for Extra Expense coverage?
Immediately after damage occurs (NO 72 hour waiting period); ends when damaged property is repaired or replaced. The Period of Restoration is NEVER subject to the policy period.
Leasehold Interest Coverage Example. Troy's rent before the damage occurred was $300K a year (or $25K per month). He had 3 years left on his lease. It will cost Troy $450K a year (or $37,500 per month) to rent a new place. How much will Troy recieve in indemnification?
Increase in lease cost: $450,000 - $300,000 = $150,000 Indemnification: $150,000 x 3 (years remaining) = $450,000
What protection is provided by the Builders Risk Coverage Form?
Protection for buildings, materials, and equipment under construction or renovation; 100% coinsurance is required on the building. Some typical criteria for policy termination includes: the policy expires, the bldg is accepted by the purchaser, the insured no longer has an insurable interest in the propery, 90 days after the construction is completed, 60 days after the building becomes occupied, the property is abandoned with no intention to complete, the bldg is put to its intended use
Which coverage form is the basis of ALL commercial property policies?
The Building and Personal Property Coverage Form. It has Coverage A (Buildings and Structures), Coverage B (Business Personal Property) and Coverage C (Personal Property of Others)
What entity is covered by the Contingent Business Interruption Form?
The business that is dependent on a key supplier is indemnified. The key supplier is not.
Describe the Monthly Limit of Indemnity
This coverage removes the coinsurance requirement, but the policyholder parcels his stated limit of coverage into a fractional maximum available each month (i.e., 1/3, 1/4, 1/6)
Describe Agreed Value
This coverage removes the coinsurance requirement. The insured submits financial data from the previous year and the upcoming year. The insured & insurer set an Agreed Value of coverage. Losses are paid in full (minus deductible)
Describe the Maximum Period of Indemnity
This coverage takes away the coinsurance requirement and the Period of Restoration lasts up to 120 days AFTER the 72-hour window. If the policy maxes out, coverage will end before the 120 days.
