CPCU 551
Pete insures his motorcycle rental property for $100,000 on an actual cash value (ACV) basis. The ACV of the property is $150,000 and his Commercial Insurance Policy (CIP) has a 90 percent coinsurance clause. A fire caused $50,000 of damage to the building structure. How much will Pete recoup under his insurance policy?
$37,037
ACV. 100K limit. 1K deductible. 110K loss. What is payment?
100K, since 110K-1K deductible exceeds the limit of insurance. NOT 99K!
Several of the broad causes of loss in the Causes of Loss Form—Farm Property relate only to livestock. Which one of the following is such a cause of loss A. Loading/unloading B. Sinkhole collapse C. Falling objects D. Fire/lightning
Loading/unloading. Sinkhole collapse, falling objects, and fire/lightning apply to all covered property
What are the 4 coverages (A, B, C, D) of the Farm Dwellings form?
A - dwellings, B-other private striations appurtenant to dwellings, C-household personal property, D-loss of use
Is there any coverage for loans not repaid by the borrower under the financial institution bond?
No
if an independent contractor steals something from an employer, is the loss covered under employee theft insuring agreement?
No
is computer fraud covered if the culprit isa partner, employee, director, trustee, or authorized representative?
No
When Sam's nephew was made a ward of the court, Sam was named his nephew's guardian. In order to safeguard the rights of the minor nephew, Sam may be required by the court to obtain which type of bond?
A fiduciary bond
Agreed Value optional coverage is often elected by risk averse firms in order to
Alleviate the risk of not complying with the Coinsurance condition.
What's the main difference between a contract carrier and a common carrier?
Common carriers offer themselves to public for hire but contact carriers do NOT. So the latter's liability is stipulated in the written bill of lading and is not absolute like, like the former's.
How does the Basic Form - Farm Property perils differ from Basic Form Commercial Property Perils?
Basic Form Farm Property includes everything that Basic Form Commercial Property covers (fire, lightning, windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, vandalism, sinkhole collapse, volcanic action) PLUS theft, collision, earthquake (livestock), and flood (livestock)
Whats the difference between basic/broad form vs. special form?
Basic/Broad forms are "named peril" forms whereas Special form provides "all risk" coverage.
Under which Farm Policy Coverage Form are improvements and betterments covered?
Barns, outbuildings, and other Farm Structures
The businessowners policy (BOP) can be endorsed to provide professional liability for which one of the following types of professionals? A. Physicians B. Beauticians C. Lawyers D. Politicians
Beauticians
The ISO Market Segments Program provides endorsements for some coverages not found in any other ISO forms, including which one of the following? A. Employee Dishonesty Coverage B. Fire Department Service Charge C. Pollutant Clean Up D. Ordinance or Law—Equipment
D. Ordinance or Law—Equipment
Which coverage can have property valued at an amount that is mutually agreeable to the insurer and insured?
DIC
Delta is a manufacturer that makes seasonal products and insures its business personal property with a Building and Personal Property Coverage Form (BPP) with a Value Reporting Form. The limit of insurance is $10,000,000 with a $10,000 deductible. Reports are due monthly. Delta suffered a business personal property loss of $500,000 caused by an insured peril but the prior month's report made was $400,000. The actual value of business personal property at the time of this last report was $500,000. What amount would Delta's insurer pay for the described loss?
Delta's insurer would pay $390,000. ($400,000 / $500,000) X $500,000 − $10,000 = $390,000
What is the payment under BPP if the insured does not meet the coinsurance requirement?
Did/shouldxloss-deductible (should = value of covered property x coinsurance %)
Lets say an the insureds dog attacks his livestock, is this loss covered under Broad Form-Farm Property?
No because the insured owns the dog.
if a loss was caused by pilot error, is the carrier liable?
No! If your plane crashes, blame it on the pilot
Computers XYZ Inc. that is sending a sales representative to Mexico to unveil a new product prototype at a trade show. The event will be held in the town square in the capital of Mexico. The representative will be in the country with the new product for an indeterminate amount of time in the event that more publicity opportunities arise. Computers XYZ has a Business Personal Property—Limited International Coverage endorsement attached to its Building and Personal Property Coverage Form (BPP). Will the endorsement indemnify Computers XYZ if the product prototype is destroyed by a covered peril?
No, because there is no return date indicated for the representative or the prototype.
is computer fraud covered when the property is transferred from outside the premises?
No, it has to be from inside the premises.
If a business is covered by a BI/EEC written on a no coinsurance basis, can it be covered by a Newly Acquired Location coverage extension?
Nope. Newly Acquired Locations have a condition where 50% coinsurance or higher must be shown (on BIC)
Cindy owns an unendorsed Businessowners policy (BOP) on her cafe. Recently, a minor earthquake caused the cafe to suffer several damages. The glass windows in the front of the store were shattered and the outdoor seating was destroyed. Additionally, the cafe's fire extinguisher was depleted and must be re-filled. Which of those losses would be covered?
None, because the BOP does not cover an earthquake as a cause of loss
Which one of the following describes the difference between a filed and a nonfiled policy form?
Nonfiled policies do not file forms or rates with state insurance departments but for filed polices both are filed.
If an employer learns that an employee commits a dishonest act, but does not terminate them, and then the employee steals something, is the loss covered under employee theft?
Nope because of the Termination as to any employee condition
If an employee, director, or trustee causes a loss by forgery or alteration, is the loss covered under forgery or alteration insuring agreement?
Nope, loses caused by these folks are excluded
Would payroll taxes continue if employees were laid off due to a loss?
Nope.
Can an insured transfer duties under common policy conditions?
Only with the insurer's written consent.
A local savings and loan association purchased Financial Institution Bond Form 24. Mandatory insuring agreements on their Form 24 include which one of the following?
Fidelity, On Premises, In Transit, and Counterfeit Money
A financial institution purchased both a SFAA Computer Crime Policy and a Financial Institution Bond. An employee of the institution managed to hack into and modify a computer program in the insured's computer system. The insuring agreement that addresses this type of loss is the
Financial Institution Bond's Fidelity insuring agreement.
Which has a broader definition of employee, commercial crime form OR the financial institution bond?
Financial Institution Bonds
Various building design features can help prevent the spread of a hostile fire. For example, a solid piece of material that is inserted between wall studs to delay the flow of heat or fire through this open space is a
Fire stop.
How would a farmer insure against production losses from natural causes?
Get an MPCI plan from the FCIC
What are two coverages that are unique to the BOP and not included in BPP?
Glass Expenses and Fire Extinguisher Recharge Expense.
Which endorsement to an ISO Commercial Crime Coverage Form that would cover a hotel owner for its legal liability for property of persons to whom it rents rooms?
Guests' Property endorsement (21)
Which flood coverage offers business income, extra expense, and ordinance and law coverage and can be written on a replacement cost or functional value basis?
ISO Flood Coverage Endorsement
What is the difference of employee theft limits between ISO Commercial Crime Policies and ISO Government Crime Policies?
ISO Government crime policies allow a per employee limit or per occurrence limit whereas the ISO Commercial Crime Policies are limited to a stated amount per occurrence, regardless of the numbers of employees.
Which coverage is primary and which is excess: ISO endorsement vs. NFIP
ISO: excess. NFIP: primary
What action a surety can take if it fears a principle will be unable to perform the obligation that is the subject of a surety bond?
If a surety fears a principle will be unable to perform the obligation that is the subject of a surety bond, the surety can require the principle post collateral.
Which crime policy insuring agreements have a $5000 per occurrence limit
inside the premises - robbery/other property, outside the premises, and computer fraud
What is the main advantage for the insured under a BOP?
it encompasses most property and liability needs of the insured.
What is the distinguishing characteristic of a Standard Property Policy (SPP)?
it is self contained
What does Mortgage Impairment Insurance cover?
it protects financial institutions from losses caused by the insured's failure to maintain insurance on mortgaged property.
What is covered under named perils coverage that isn't covered under all risk coverage (open cargo policy)
jettison, pirates
What is the most common exclusion for commercial crime policies aside from the employee theft coverage form?
loss caused by an employeee
whats the difference between loss sustained and discovery crime forms?
loss sustained form losses must have occurred during and were discovered during the policy period, but discovery form losses only need to be discovered during the policy period, but could have occurred before the policy period.
Name the 10 special form exclusions
maintenance, employee dishonesty, voluntary parting, unauthorized instructions, inventory shortage, unexplained disappearance, concurrent causation (weather, acts/decisions, faulty planning), pollutants, production errors.
Business Income =
net income plus continuing normal operating expenses, including payroll
What are the parameters for a business to be eligible for BOP?
no more than 25k sq feet or $6 mil in annual gross sales at each location!
are credit card transactions covered under computer fraud?
no, excluded
are scams involving exchanges or purchases covered under crime insurance inside/outside premises?
no, excluded
Is damaged to others' property which is not is the care, custody, or control of the insured covered under EBP?
no, it has to be in the care custody or control
Let's say a company learned about an employee theft prior to the policy period, is this covered?
nope
are stress tests covered by equipment breakdown policies?
nope, they're excluded.
What's the difference between a DIC and a DIC endorsement? Why would someone choose one over the other?
the DIC endorsement usually doesn't provide open peril coverage, carry a lower limit than other covered property, and usually have higher deductibles, but they avoid minimum premiums and are part of one policy.
What does the insured collect if less than 80% coinsurance? (BOP)
the GREATER of ACV or [(cost to repair or replace - 500 deductible) x policy limit/(.8 x replacement cost)]..... if it was above 80% then it would just be replacement cost
Which of the following, if any, are covered under the NFIP's General Property Policy? Pollution damage, debris removal, loss avoidance measures, or earthquake/volcanic eruption?
the first 3 are covered
Who has the burden of proof under inside the premises-theft of money or securities insuring agreement?
the insured must prove destruction
To comply with regulations, equipment must sometimes be inspected. Who inspects it?
the insurer!
Who is the principal in a plaintiff bond, the defendant or the plaintiff?
the plaintiff
Define robbery
the unlawful taking of property from a custodian by one who has threatened bodily harm to the custodian or committed an unlawful act seen by the custodian (robbery requires the presence of another person)
What are the main things that special form covers that broad form does not cover?
theft, friendly fire, vehicle damage, and water damage caused by ice dams
how can small businesses eliminate the waiting period caused by a usual 72 hr wait prior to start of period of restoration under BOP?
this can be eliminated by endorsement. this condition doesn't bode well for small businesses.
The Completed Operations Aggregate Limit of the BOP may be increased by endorsement to ______ times the liability and medical expense limit.
three
What is jettison?
throwing cargo overboard to lighten ship
What's the purpose of the financial institution bond?
to provide crime insurance coverage for financial institutions
combustion explosion is covered by commercial property (CPP) forms but do not cover boiler explosion, electrical breakdown, mechanical breakdown, and rupture or bursting due to centrifugal force (so you'll need an EBP for these)
true
What is the aggregate limit for products-completed operations liability?
twice the per-occurence limit or 3-times the per-occurence limit by endorsement.
what period is covered by Acts of Civil Authority (BIC) additional coverage?
up to 4 weeks after 72 hr deductible
what determines liability for air carriers?
warsaw convention
When would a business add the ordinary payroll limitation or exclusion endorsement and why?
when employees represent a high proportion of total expenses and can be easily replaced and the shutdown can last over 6th months. This decreases the amount of insurance needed to comply with the coinsurance requirement by excluding some or all of the ordinary payroll from gross earnings. Basically, the company will fire these employees if shit hits the fan.
when is the only time commercial property (CPP) forms cover electrical breakdown of motors?
when the loss is caused by lighting, otherwise you need an equipment breakdown policy
what does it mean to have died intestate?
without a will
what is the courage territory for forgery and alteration insuring agreement?
worldwide
Can crop hail insurance be extended to cover fire, windstorm, or damage caused by livestock or vehicles?
yes
If an employee steals something, but they are not convicted of theft, is the loss covered under employee theft insuring agreement?
yes
is the property covered under ISO Equipment breakdown broader than that for covered equipment?
yes, it includes all property that the named insured owns and property in the named insured's care, custody, or control for which the insured is legally liable
Does a residential condo billing association policy pay on an ACV or a replacement cost basis, or both?
Replacement cost
What is the difference between scheduled classes and scheduled items under Scheduled Farm Personal Property Coverage (E) in terms of their limits when they are off the premises?
Scheduled items are covered off the premises for their full limits, but if they aren't specifically scheduled yet are still part of a scheduled class (i.e. farm machinery) then they're only covered for up to 10% of their limits.
What do the unit owners (tenants) own in a cooperative corporation?
Stock. Whereas it is the Cooperative Corporations own the real property.
What determines liability for common carriers for water shipments and is there a package limit?
The Harter Act, no
Who develops a standard form? Who does a non-standard form typically favor?
The ISO, ASIS, or other insurance advisory organization. Non-standard forms typically favor insureds.
An insurance company recently leased a new office location in Dallas, Texas. On September 26, 2010, prior to occupying the building, the company spent $250,000 on building improvements. The useful life of these improvements was 10 years. On September 26, 2011, the improvements were destroyed and replaced by the building owner at a cost of $300,000. Under the company's Building and Personal Property Coverage Form policy the amount reimbursable for this loss is
Under the company's Building and Personal Property Coverage Form policy the amount reimbursable for this loss is $0. The building owner made the repairs, not the tenant.
Is property in furnished rooms covered by an unendorsed or endorsed businessowners Coverage Form?
Unendorsed
The risk manager for a painting company has purchased an outdoor property extension policy to cover their trees, shrubs and signs not attached to the building. Which of the following would not be considered a covered cause of loss? Civil Commotion, lightning, explosion, windstorm?
Windstorm.
On January 21, the manager at a large banking operation informs the risk manager that there has been an employee theft of $1,500,000 at the bank. The theft occurred in October 2, the previous year when the bank was insured with the same carrier under an ISO loss sustained commercial crime policy. There was no gap between the two policies. Considering the time lapse, the bank manager asks the risk manager if they are covered by insurance. Which one of the following is the correct answer from the risk manager?
Yes. The Loss Sustained During Prior Insurance issued by Us or Any Affiliate condition provides coverage
T/F The limits of insurance in the ISO Flood Coverage Endorsement is the most an insurer will pay for any number of occurrences in a period.
false. single occurrence in a period
What does the Farm Dwellings form exclude?
farm structures (barns, silos), farm personal property (feed, livestock, machinery)
When should blanket BIC coverage be used?
for interdependent (or independent) operations in multiple locations.
What must the principal avoid under merchandising and dealer bonds
fraudulent and unfair business practices
Who must be bonded in a public official bond?
handlers of public property or funds, administrators, and those who deal directly with the public.
what heats fired pressure vessels and what could happen to them if shit hit the fan?
heated by burning fuel, they're prone to explosion
What is the maximum payable loss under the Newly Acquired Location (BIC) coverage?
$100,000
An insured chooses the "Agreed Value" option for its Building and Personal Property Coverage Form (BPP). The agreed value for the property is $100,000 and the limit of insurance is $120,000 with a $5,000 deductible. The building is totally destroyed by a covered cause of loss. At the time of the loss, the value of the building was $130,000. The insurer would pay
$120k.
A business purchased an Earthquake and Volcanic Eruption Endorsement (Sub-Limit Form) to attach to a Building and Personal Property Coverage Form (BPP). The insured building has an insurable value of $3,000,000. The endorsement is subject to a 10 percent deductible and a sublimit of $2,000,000. In the event of a covered $450,000 loss, the amount payable is
$150,000. $450,000 − ($3,000,000 X .10) = $150,000 the 10% deductible applies to the insurable value, NOT the loss. Furthermore, in this coverage, the deductible is always applied as a percentage.
What's the BOP deductible?
$500
What's the liability limit per package under COGSA?
$500
whats the average carrier liability rate?
$9/lb
The maximum amount of coverage provided at each building under the Newly Acquired or Constructed Property extension in the Building and Personal Property Coverage Form is
(for up to 30 days) $250K of your building coverage and $100 of your contents coverage at any acquired location, but we'll charge you for the coverage.
A building under construction is insured on an unendorsed Builders Risk Basic Form policy for $100,000. During the course of construction, defective materials caused the main floor to collapse, resulting in a $10,000 loss. The actual cash value of the building at the time of loss was determined to be $110,000. Assuming a $1,000 deductible, the amount payable to the insured is
0 as collapse is not a covered peril under the basic form.
Under a forfeiture bond, what percentage of the bond penalty must the surety pay if the principal fails to complete the obligation?
100%
What's the minimum deductible of a financial institution bond and how soon must the loss be reported?
1000 and 30 days
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 $250,000. After suffering a $43,000 loss, the insurer will pay (rounded to the nearest $100)
24,400
How long is EBI (extended buiness income coverage) coverage extended up to?
30 days to 'win back' customers, 730 days for extended period of indemnity
How long are newly acquired locations covered under the coverage extension for BIC
30 days.
How many ad's off-premise coverage are provided under NFIP?
45
A small business owner purchased an unendorsed Building and Personal Property Coverage Form (BPP). The limit on the policy is $500,000 which meets the coinsurance requirements. The deductible is $1,000. The total value of the insured property is $525,000. The insured suffered a $510,000 covered loss to the property. What will the insurer pay?
500K. The deductible comes off the loss not the limit of insurance.
What condition must be met in order for the 6 BPP coverage extensions to apply?
80% or higher coinsurance or value reporting applies as additional insurance, no coinsurance. Whatever the **** that means.
A building had been vacant for 60 days, and the insurer didn't know about it, when it sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler leakage, respectively. What amount is covered under CPP?
85K, 0, and 0. If a building is vacant for 60 or more consecutive days before the loss, they won't pay for any loss caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft... otherwise you'll only get 85%
what is the coinsurance requirement for blanket insurance?
90%
How do you calculate the agreed value payment if the limit is less than the agreed value?
= (limit/agreed value x loss)-deductible.
What are coverage parts A, B, C, and D under NFIP? To which do deductibles apply?
A - building, B - personal property, C - debris/loss avoidance measures/pollution, D - increased cost of compliance. Deductibles apply separately to A and B only.
Name the 4 (A, B, C, and D) insuring agreements of the ISO Mortgage Impairment Insurance
A-Mortgagholders' interest, B-Property Owned or Held in Trust, C-Mortgageholders' Liability, D-Real Estate Tax Liability
What deductible most often used for spoilage coverage in the Equipment Breakdown Protection Coverage Form?
A. Percentage of loss deductible
A self-storage facility purchases an ISO Commercial Package policy with the Market Segments Customers' Property Legal Liability endorsement with its standard limit and deductible. While the policy is in force, a fire occurs at the storage facility. The facility is liable for $135,000 worth of damage to customer property. Based on the information provided, the amount of money the storage facility will pay out of pocket is
After subtracting the $250 deductible, the covered loss is $134,750. Because this exceeds the $100,000 policy limit, the full $100,000 would be paid. The remaining $35,000 is the responsibility of the self-storage facility.
A shipping company contracted with Cruise Ship Art Galleries for delivery of artwork to be sold on the ship. The shipping company delivered the artwork directly to each port of call. Coverage for the artwork was under an inland marine policy. The valuation provision that would best be applied to a loss to the artwork prior to delivery would be the
Agreed value is appropriate for items that are difficult to value such as works of art.
A national telecommunications company is in the midst of constant change. They frequently are opening new locations in various cities. Once they establish themselves in a sector, they will close some of their locations initially intended for the acquisition and set-up of new accounts. The type of policy that would best suit this type of business is...
An output policy because it provides "all-risks" coverage for property at fixed locations AND property away from insured's premises
How would a farmer cover animal death from injury, sickness, or disease?
Animal Mortality Insurance
When (if) can an insurer examine their insured's books and records?
Anytime during the policy period and up to 3 years after. The final premium is established after the policy period expires. Premiums are estimated at its formation.
Damage to excavations, foundations, underground pipes and flues are covered under which one of the following policies? A. Business Income Coverage Form B. Businessowners Coverage Form C. Business Contingent Coverage Form D. Business and Personal Property Coverage Form
B. BCF
Which has a higher limit for both electronic data and interruption of computer operations, BPP or BOP?
BOP ($10K for both) compared to $2.5K for BPP
Which has higher limits for outdoor property, BPP or BOP?
BOP ($2.5K/$500 per item) compared to $1K/250 per item for BPP
What's the difference in business income limits between BCF and Business income coverage?
BOP has a one-year limit, not a dollar limit (ordinary payroll is only covered for 60 days, however
How does personal property of others coverage differ between BPP and and BOP?
BPP only covers property of others that the insured has leased and is contactually obligated to insure, the BOP covered others' property under the SAME LIMIT!
The county fairgrounds committee is seeking contractors to build a new stable for the annual farm show. Contractors are required to guarantee that they will enter into a contract upon acceptance of the bid. In addition, the contractor must guarantee that the project, once completed, will be free of liens. To satisfy the committee's requirements, contractors who want to participate in the project will need to provide which pair of bonds?
Bid bond and a payment bond
In an equipment breakdown policy, explosion caused by excessive internal pressure of steam is a breakdown loss that can occur to a _____?
Boiler
Is NFIP available from FEMA or private insurers?
Both
A landlord leases a portion of a strip mall to a dry cleaning business. When the tenant moved into the building, the tenant installed dry cleaning equipment for the business. It also installed new carpeting and tile throughout the building. Under the landlord's BPP - are the improvements considered part of building coverage or personal property of others?
Building Coverage. The owners' use interest in improvements and betterments are covered as the 'owner's property'
What does BPP stand for?
Building and Personal Property (coverage form)
what is BCF?
Business-owners coverage form (BOP)
To whom is the 'invoice value' valuation alternative appropriate? (Inland Marine Coverage)
Buyers and Sellers
The Liability and Medical Expenses Limit in the Businessowners Policy is the equivalent of what limit or limits in the Commercial General Liability Policy?
C. Both the Each Occurrence Limit and the Personal and Advertising Injury Limit
What are the differences between CP Builders Risk Coverage and IM Builders Risk Coverage
CP is named perils, IM is all risk and covers property in transit and away from the job site, includes property of others. CP covers collapse, boiler explosion, theft, flood and earthquake, and sets value at RC... IM doesn't.
Which prevents an insured from waiving rights of recovery against contractors and subcontractors, IM or CP Builders Risk Insurance?
CP prevents an insured from waiving rights of recovery against contractors or subcontractors.
Which one of the following policies would respond to a furnace explosion? A. Businessowners policy B. Commercial property policy C. Equipment breakdown policy
CPP! not EBP
What does CGL stand for?
Comprehensive General Liability
The Brands and Labels endorsement
Cover the additional costs to the insured when they are preparing salvage items for sale.
Ignoring business income what should determine the equipment breakdown limit when a policy covers a single location? A. Coinsurance requirements B. Catastrophic exposure C. Covered property value D. Jurisdictional inspections
Covered Property Value
Which takes precedent in financial institution bonds, D (forgery or alteration) or E/F (securities and counterfeit currency)?
E and F
What are coverages E and F under a Farmowners policy?
E-scheduled farm personal property F-unscheduled farm personal property
the Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate condition of a commercial crime policy does what?
Eliminates the"penalty" for changing insurers, provided the limits of insurance have not changed.
The treasurer of a contracting company wrote several checks to a friend's company and forged the president's signature on the contracting company's checks. Which ISO Commercial Crime Coverage Form insuring agreements would cover this loss?
Employee Theft
Which one of the following exposures is not included in a standard BOP, but can be purchased as an optional coverage? A. Forgery B. Electronic data C. Employee dishonesty D. Interruption of computer operations
Employee dishonesty
Which coverage form excludes fraudulent warehouse receipts?
Employee theft
T/F: Estate executor - no will. Estate Administrator-is a will
F - estate executor - is a will. administrator - no will
Under equipment breakdown coverage, which one of the following meets the definition of a "breakdown?" A. Failure of vacuum equipment B. Failure of a safety device C. Damage to a vacuum tube D. Malfunction because of improper calibration
Failure of vacuum equipment
T/F Business income reimburses for non-continuing expenses.
False.
True or False.. There does not have to be damage to the property for Acts of Civil Authority (BIC) coverage to apply.
False. there has to be damage for the coverage to apply.
How to calculate the limit of insurance to buy
First calculate the coinsurance percentage (estimated MPL/Coinsurance Basis), round to nearest tenth. Then multiply the coinsurance percentage by the coinsurance basis.
SCF Company manufactures candy and has been in business for over 80 years in the same building. Because of the change in building materials and building codes, an endorsement the owner should consider for replacing the building in the event of a loss is
Functional Valuation method, which also includes ordinance and law coverage
When analyzing what deductible amount to choose for its Building and Personal Property Coverage Form (BPP), an insured should consider
If the items on the BPP will be listed separately or on a blanket basis.
When does the Extended Business Income Coverage NOT apply. (it usually applies for 30 days beyond the time the damaged property is repaired and normal operations resume)
If the loss of income is a result of consequences of the covered loss in the area where the described premises are located. For example, if power was out in many areas surrounding the building damaged in the loss.
Why would an insured choose the No Coinsurance option (BIC)?
If their EML is a small percent of the amount of needed to satisfy the coinsurance requirement.
Let's say an earthquake causes damage to a Barn and kills a cow, does the Basic Form Farm Property cover this?
It covers the loss to the livestock but not to the barn.
What does the utility interruption insurance agreement (part of EBP) cover?
It extends business income coverage provided by the policy to include loss resulting from the breakdown of equipment owned by a local utility.
Luke is a commercial underwriter assessing the accounts receivable coverage for a prospective customer. He wishes to make changes to various policy provisions before accepting the risk. What is true regarding these changes?
It is a filed class of inland marine coverage, and insurers are allowed to substitute provision in the standard policies.
How much coverage does the Causes of Loss—Special Form provide under its Additional Coverages and Extensions for Property in Transit?
It provides $5,000 of additional insurance for the insured's property in a motor vehicle.
What does the Farm Umbrella Liability Policy of the ISO farm program do?
It provides limits of liability in excess of all underlying liability policies.
What are the two types of court bonds?
Judicial bonds and fiduciary bonds
HPR insurance is generally used for what kind of property
Large property accounts
How do rates from legal liability coverage forms compare to typical rates for direct property insurance?
Legal Liability Coverage rates are typically lower.
A Combination Safe Depository Policy contains which insuring agreements?
Loss of Customers' Property; Premises Damage
What is the agreed value payment if the limit of insurance is greater than or equal to the agreed value stated in the declarations? (BPP)
Losses will be paid in full up to the limit of insurance (each loss subject to deductible).
When a mortgage company discovered that the money collected under several escrow agreements was not used to pay the mortgagors' real estate taxes, on which insurance policy could they rely?
Mortgage impairment insurance
is a watchman or janitor considered a custodian with respect to robbery?
NO
Can an insurer cancel a policy verbally? How many days notice? To whom is it communicated?
No, it must be in writing. 10 days notice for nonpayment. 30 days for all other reasons. To the First Named Insured.
Can NFIP do LOU, blanket, coinsurance, or replacement cost?
No, no, no, and no.
Is the cost to replace electronic data covered by extra expense coverage?
No, only to replace lost information other than electronic data.
If an wolf attacks a sheep, is the loss covered under broad form farm property?
No, sheep aren't covered.
is employee theft covered in mexico?
No, the coverage territory is limited to the US/territories, Puerto Rico, and Canada.
must the insured notify the police for theft and/or forgery or alteration losses?
No, theft and forgery/alteration are the only exceptions to the insured's duty to notify the police
Are livestock eligible for Special Form Farm Property Coverage?
No, they aren't.
Must an insured under a Crime Policy notify the police after an employee theft?
No. They must notify the police if a covered loss violates the law EXCEPT in the case of theft and forgery/alteration.
is fire covered under inside and outside the premises crime insurance?
ONLY for money and securities
How is the deductible applied in BPP?
Once per occurrence.
The Accounting or Arithmetical Errors or Omissions exclusion applies to which one of the following ISO Commercial Crime Coverage Form insuring agreements?
Outside the premise
Who has a "fee simple" title to their unit?
Planned Unit Development Homeowners.
What does the ensuing loss provision do?
Prevents insured from stacking regular policy limit
If the improvements and betterments sustained a loss sometime during a business's lease and if the building owner repairs the rental space, but the company (lessee) does not replace the improvements and betterments once the space is repaired, what valuation method is used under the lessee's BPP policy?
Pro-rata based on the length of the lease, the time expired since the improvements and betterments were installed, and the original cost
What is one challenge a unit owner could face under the all-in concept?
Since unit owners own improvements and upgrades, they could become under insured if they make too many improvements or upgrades.
T/F Feedlot insurance policies are a form of bailees' liability coverage.
T
T/F the Farm Liability Coverage Form of the ISO farm program covers both personal and farm liability exposures.
T
In which condominium association agreement concept does the unit owner own everything inside load baring walls, including non-load baring walls and plumbing.
The Bare-wall concept
What is the FCIC and the MPCI
The FCIC is the Federal Crop Insurance Corporation who provides MPCI, Multiple Peril Crop Insurance, which insures against unexpected production losses from natural causes, including drought, excessive moisture, hail, wind, frost, insects, and diseases.
Which condominium association agreement concept includes improvements made by the unit owner as property owned by the association?
The all-in concept
What determines liability for contract carriers for water shipments?
The charter
Where's the starting point in determining an organization's EML?
The coinsurance basis
Name a disadvantage of Difference in Conditions (DIC)-type endorsements compared to separate DIC policies.
The coverage is often not as broad as that of a separate DIC policy.
A disgruntled employee of the insured returned to his employer's store late at night and broke into the locked registers, taking the minimal morning cash set up. The employee also damaged the lock boxes and took some store merchandise. Which types of property in this scenario would be covered under the Causes of Loss—Special Form?
The damaged registers and lock boxes would be covered as items stolen by employees are not covered.
An insured should set the limit for equipment breakdown business income coverage on the basis of which one of the following?
The estimated maximum loss of business income or the amount needed to comply with the Coinsurance condition, whichever is greater.
What's the difference between the condo commercial unit owner's coverage form and a BPP coverage form?
The former covers fixtures, improvements, and alterations owned by the unit owner while the BPP covers the insured's use interest in the same.
An employee at an accounting firm uses a third-party vendor's accounting software on a daily basis. During the course of employment at the firm, it is discovered that the employee published a copy of the accounting software on an open-source software site. As a result, the accounting firm must pay damages of $150,000 for the unauthorized reproduction of the software. The accounting firm has an ISO Commercial Crime Coverage Form that contains no endorsements. Does coverage apply?
The loss is not covered by the firm's ISO Commercial Crime Form.
A manufacturing company has business personal property valued at $1,500,000. The risk manager is considering insuring the business personal property with 80 percent coinsurance at a $0.40 rate per $100 of coverage. The 100 percent rate is $0.35 per $100 of coverage. if the business personal property is insured with an 80 percent coinsurance, how much premium will be saved?
The savings will be $5,250 − $4,800 = $450
What is the difference between the BIC (w/extra expense) and the separate extra expense coverage?
The separate extra expense coverage form limits the amount of extra expenses covered per month.
Which condominium association agreement concept is also called original specifications coverage, where the association owns all property originally sold to the unit owner?
The single-entity concept
Loss assessment coverage can be added by endorsement to the ISO Condominium Commercial Unit-Owners Coverage. With this endorsement attached the insurer will pay...
The unit owner's share of an assessed loss charged to all unit owners by the association.
Company A's business was booming and they hired six additional employees during the first three months of the current policy period of its ISO Commercial Crime Coverage Form. They also had an opportunity to purchase company B and acquire the organization's assets and liabilities but not any of its employees. Company A did not inform their insurance agent of either of these activities. Six months after the acquisition of Company B, Company A submits a commercial crime claim when they discover an employee theft by one of the six new employees they had hired. Which one of the following statements describes whether their insurer will cover this loss?
There is coverage because of the policy condition that applies to additional employees.
An A&E Accounting Company (A&E) operates a bookkeeping business insured with an unendorsed Businessowners Policy (BOP). On rare occasions an A&E assistant will use a personal auto to drop off completed tax returns at the local post office on the way home from work. Recently, the assistant was involved in an at-fault accident en route to the post office. Which one of the following best describes how the BOP will handle this loss?
There will be no coverage because there isn't a Hired and NonOwned Auto endorsement on the policy.
Bridges, piers, wharves, and docks are initially excluded from the Building and Personal Property Coverage Form primarily because
They require careful underwriting
Who owns the common elements of a condominium?
They're owned jointly by all condo owners.
Condominium unit owners may wish to limit the insurance coverage on their units...
To avoid duplicating coverage maintained by the association.
True or False: Under the Ordinance or Law Coverage Endorsement, a replacement building may be on the same premises or elsewhere, but it must be intended for occupancy similar to the damaged premises.
True
True or False: A condition related to claims is that the insured must give the insurer a detailed and sworn proof of loss within 120 days of the loss.
True
What is the coverage territory for EBP?
US, Puerto Rico, Canada
In equipment breakdown insurance, air conditioning and refrigeration equipment includes components such as Coils?
True
T/F Business Income bases coinsurance on continuing AND non continuing expenses.
True
True or False: Blanket Insurance covers additional debris removal if the loss only occurs at one location.
True
T/F An output policy can carry automobile coverage.
True.
Name a situation where an SPP would be used
When a building would be too risky to insure in the standard market, so they have to resort to a FAIR plan.
When does the coverage period begin for the bPP limited international coverage endorsement?
When the property LEAVES the insured's premises.
If an insurer wishes to cancel employee theft coverage because of a certain employee of the insured's, are they able to do so?
YEs, but they have to give 30 days notice.
Does the Financial Institution Bond protect insureds against acts from dishonest or fraudulent acts of employees?
Yes
Is bulging is an example of a breakdown loss to a fire pressured vessel?
Yes
tangible property is covered while within offices or premises located anywhere as part of the ON premises insuring agreement of the Financial Institution Bond if the loss is caused by robbery/burglary, or mysterious disappearance. Is money considered tangible property in this case?
Yes
if an employee has was terminated 30 days ago and stole something, is the loss covered under employee theft insuring agreement?
Yes - employees terminated in the last 30 days still count as employees if we were to take the title of this coverage literally
is money orders and counterfeit money insuring agreement covered in canada?
Yes, along w/ US and Puerto Rico, like w/ employee theft
are losses to money and securities caused by theft, disappearance, or destruction covered under the outside the premises insuring agreement?
Yes, and so is other property caused by actual or attempted robbery IF the property is outside the premises AND in the care and custody of a messenger or an armored vehicle company.
Does a BOP include liability coverage?
Yes, in addition to property coverage, and common conditions
are telephone system's covered under equipment breakdown?
Yes, office equipment is a covered loss exposure
If an insured inadvertently fails to notify the insurer of newly acquired property and there is a loss that would otherwise be covered by EBP, is this property covered?
Yes, under 'errors and omissions'
On January 21, the manager at a large banking operation informs the risk manager that there has been an employee theft of $1,500,000 at the bank. The theft occurred in October 2, the previous year when the bank was insured with the same carrier under an ISO loss sustained commercial crime policy. There was no gap between the two policies. Considering the time lapse, are they covered for the loss? why or why not?
Yes. The Loss Sustained During Prior Insurance issued by Us or Any Affiliate condition provides coverage.
If blanket insurance w/ a $100K deductible, what would the payment be if a fire loss caused $800 to building and $400 to business personal property (if these items were scheduled separately).
Zero.
Ordinance or Law Coverage Endorsement... a? b? c?
a - covers loss to undamaged portion that is not permitted to be used. b - covers cost to demolish undamaged portion/debris. c - covers increased cost to repair up to standards (within 2 yrs)
What what basis are unscheduled farm personal property covered?
a blanked basis, subject to 80% coinsurance
What's the inchmaree clause?
a clause of open cargo-named perils coverage which adds coverage for damage from propulsion machinery, boilers, latent defect of vessel, and negligence of master and mariners.
What is an HO-6?
a coverage form for a residential condo.
who is a lessee and who is a mortgagee?
a lessee is the person to whom a lease is granted by the lessor, and a mortgagee is the lender who loans money to the mortgagor to buy real property (they're kind of opposite, ya know?) The lessee is the little guy and the mortgagor is also the little guy
Describe the limits of the financial institution bond.
an aggregate limit PLUS single-loss limit for each of its seven insuring agreements (fidelity, on premise, in transit, forgery/alteration, securities, counterfeit, fraudulent mortgages,
Under compliance-only bonds, to what is the principal guaranteed to comply?
applicable laws
What types of businesses are ineligible for BOP?
auto, bars, manufacturing, finance, general contractors.
Name the 5 equipment breakdown loss exposures
boilers/pressure vessels, electrical, mechanical, cooling, office
do ISO BOPs provide named perils (basic form) or special-form coverage?
both - primarily special form, but there's a named perils endorsement
What does BOP cover? (4)
buildings, personal property, business income and extra expense
Is a consignee a seller, a buyer, or a transporter?
buyer
what are boilers made of and what do they do?
cast iron or steel, they heat water by combustion to form hot water or steam
Amount of insurance to buy (BIC) =
coinsurance basis x coinsurance %
if there is overlapping coverage for a computer-related cause of loss, which insuring agreement takes precedent, computer fraud or funds transfer fraud?
computer fraud
What are the coverage limits of employee theft insuring agreement? (not a number, instead on what basis is it covered and how is the limit measured)
coverage is blanket and limited to a stated amount per occurrence
From what do soft costs derive?
covered physical losses causing delay in completion necessitating rewritten contracts, additional interest, readvertising, and additional brokerage commissions.
What are the two coverage extensions for both inside the premises-theft of money or securities coverage form and inside the premises-robbery or safe burglary insuring agreement?
damage to premises, containers
Name the three acceptable definitions of breakdown.
direct physical loss caused by failure of pressure or vacuum equipment, mechanical failure including rupture or bursting caused by centrifugal force, or electrical failure including arcing (electricity jumps gaps)
Are financial institution bonds cover losses on a loss-sustained basis or on a discovery basis
discovery
What happens if the CPP insurer and the EBP insurer dispute coverage?
each insurer will pay the entire amount of loss covered under its own policy plus half of the amount in dispute.
What is a necessary characteristic of a sign to be covered under a sign coverage form?
either a neon tube or mechanical feature
what is fidelity coverage (part of the financial institution bond)
employee dishonesty coverage
what are the 8 ISO commercial crime coverage forms?
employee theft, forgery/alteration, inside the premises-theft of money/securities, inside the premises-safe/other property, outside the premises, computer fraud, fund transfer, counterfeit/money orders.
does crime insurance apply as primary or excess of other insurance that covers the same loss, up to the policy limits?
excess
What's another name for a warranty (open cargo policy, all-risk coverage) and what are the 3 warranties?
exclusion. Strikes, riots, civil commotion; free of capture/seizure; the delay clause.
What common perils affecting equipment are covered by CPP but not EBP (equipment breakdown)?
explosion of unfired pressure vessels, furnace explosion, fire.
What are the four basic things covered under board form?
falling objects, weight of snow, ice, or sleet, water damage (w/ exclusions) additional coverage-collapse
What are the 3 factors that affect transportation exposures?
number of parties involved, ownership of goods, carrier liability
What is included under building coverage under BOP that is not included under BPP?
property in common areas and the landlord insured's personal property in apartments and rooms furnished by the insured as landlord.
Are limits higher under emergency NFIP program or regular NFIP program?
regular
How are mass-produced computer data and media valued under EBP?
replacement cost
Does the BOP use replacement cost or ACV?
replacement cost by default, but with ACV option. however, the following are ACV: art, property of others, household contents, used merchandise, manuscripts
What what basis are barns, outbuildings and other farm structures covered, aside from improvements and betterments?
replacement cost of ACV
On what basis does RCBAP pay losses?
replacement cost.
Is a loss caused by a computer virus excluded under computer fraud?
see 17, don't think so
How is the deductible applied to building and contents under NFIP?
separately
whom does the ISO Market Segment program help to meet their needs of insurance?
small and midsize businesses
When does the period of restoration begin and end?
starts 72 hrs after direct damage, ends on the earlier of the date on which the property should , with reasonable speed and quality, be repaired or replaces or the insured resumes its business at a new, permanent location.