BUILDING AND PERSONAL PROPERTY (BPP) COVERAGE (551-2)

Question 1

Three types of property covered by the Building and Personal Property Coverage (BPP) if shown in the declarations

Answer 1

1. Building
2. Your business personal property
3. Personal property of others

Question 2

Where the BPP covers

Answer 2

Property located at the described locations or within 100 feet of the nearest boundary of the land considered part of the insured premises. Two coverage extensions provide limited coverage for property away from the described premises

Question 3

BPP: Building

Answer 3

a. The building described on the declarations page plus completed additions
b. Permanently installed fixtures( personal property items permanently affect to the building) including our door fixtures
c. Permanently installed machinery and equipment
d. Your personal property used to maintain or service the building including fire extinguishers, outdoor furniture, floor coverings, and appliance used for refrigeration, ventilation, cooking, dishwashing or laundering
e. And if not covered by other insurance, additions under construction, alterations and repairs and materials, equipment and supplies and temporary structures on or within 100 feet of the building used to construct additions, alterations, and repairs

Question 4

BPP: Your business personal property

Answer 4

In the building or within 100 feet of the described premises consisting of:

a. Furniture and trade fixtures (fixtures removable by a tenant)
b. Machinery and equipment
c. Stock (consisting of items to be sold including their packaging)
d. All your other business personal property
e. Your use interest in improvements and betterment you bought (fixtures to real property that change or enhance its value – and which may or may not include repairs and maintenance depending on the insurer’s understanding of improvements and betterments*
f. Leased personal property you’re contractually obligated to insure.
* The landlord’s interest in improvements and betterments is insured under the landlord’s building coverage. Coexistent insurance on the same improvements and betterments is enforceable since both landlord and tenant have insurable interest in them.

Question 5

BPP: Personal property of others

Answer 5

For organizations with commercial bailment exposures (one party – the bailee – holds the property of another – the bailor – for some purpose beneficial to one or both parties.) Loss settlement is made with and payment made to the property’s owner.

Question 6

Property specifically not covered by the BPP

Answer 6

a. Buildings and other real property: land, water, bridges, paved surfaces, retaining walls not part of the described building, piers, wharves, docks, pilings, foundations below the basement or below ground if there is no basement, underground pipes, flues, drains, and costs of excavations, grading, back-filing or filling
b. Plants and outdoor property: growing crops and lawns, outdoor harvest crops, outdoor trees, shrubs and plants (unless they are stock), outdoor fences, radio and television antennas and towers
c. Other personal property: DEMCABS (Deeds, Evidences of debt, Money, Currency, Accounts, Bills, Securities and note), vehicles/watercraft/aircraft (if licensed for use on public roads or normally operated off-premises), animals (except those held for sale or boarded by insured), electronic date (except stock of prepackaged software and electronic date integrated in the building’s structure)(additional coverage for damage to electronic data), the cost to replace valuable papers and records (limited coverage available through coverage extension), contraband and property more specifically insured under another coverage or policy.

Question 7

6 BPP Additional Coverages

Answer 7

1. Debris removal
2. Pollutant cleanup and removal
3. Preservation of property
4. Fire department service charge
5. Increase cost of construction
6. Electronic date

Question 8

Debris removal

Answer 8

We’ll pay for removal of debris of covered property on the described premises if the debris results from a covered loss. You must report expenses to us within 180 days of the date of physical loss to be covered. The most we’ll pay is 25% of the payment for direct damage loss including your deductible) plus up to an additional $25,000 when debris removal expenses exceed the amount of coverage otherwise available.

This coverage does not apply to the costs to remove:

a. your own property that is not covered by the BPP
b. property in your possession that is not covered
c. property owned or leased to your landlord unless you have contractually agreed to insure that property and it is insured under your policy
d. property that is excluded under the BPP, or
e. property of others of a type that would not be covered property

This coverage does not apply to the cost to:

a. extract pollutants from land or water or
b. remove or restore polluted land or water

Question 9

Debris removal examples:
BPP limit: $500,000 on building
Deductible: $1,000

Answer 9

(3) Examples of Debris Removal Losses:

EX 1. Debris removal is less than 25 percent of the sum of loss payments plus the deductible

BPP limit: $500,000 on building
Deductible: $1,000
Amount of loss: $10,000 damage to building, $2,000 debris removal Debris removal is less than 25 percent of the sum of loss payments plus the deductible . (*Deductible applies to building loss and debris removal)

Sum of loss payment + deductible = $10,000
$10,000 x 0.25 = $2,500
$2,000$9,000

Insured collects:
$36,000 (for building damage) - $1,000 deductible = $35,000 (amount collected for direct physical loss)

$35,000 + $22,000 (($9,000 (25% sum of loss payments plus the deductible) plus $13,000 of the additional $25,000) = $57,000

EX 3. Building loss exceeds the amount of insurance

BPP limit: $500,000 on building
Deductible: $1,000
Amount of loss: $505,000 damage to building, $60,000 debris removal Building loss exceeds the amount of insurance

Insured collects:
$500,000 (for building damage, limit of insurance) + $25,000 (for debris removal additional limit) = $525,000

The insured’s payment is not reduced by the deductible. The deductible is subtracted from the amount of the loss not from the limit, and the remainder exceeds the limit of insurance. Therefore, the insurer pays the full building limit

Question 10

Pollutant cleanup and removal

Answer 10

We’ll pay to extract pollutants from land or water at the described premises if their release was caused by a cover cause of loss and if you report the expenses to us within 180 days of the incident. The most we’ll pay is $10,000 per covered location per annual policy year.

Question 11

Preservation of property

Answer 11

If property is moved to save it from covered loss, we’ll cover any (even war) direct loss to it while it is being moved or temporarily stored but only for 30 days from when it was first moved. This protection is subject to the limits of insurance.

Question 12

Fire department service charge

Answer 12

We’ll pay up to $1,000 of required fired department service charges, no deductible.

Question 13

Increased cost of construction

Answer 13

We’ll pay the lesser of $10,000 or 5% of the building limit for the increased cost of complying with ordinances or laws governing the repair, rebuilding or replacement of a covered building if coverage is on a replacement cost basis. There is no coverage for loss to any undamaged part of the building that must be removed or the cost to demolish the undamaged portion of the building and remove the debris.

Question 14

Electronic data

Answer 14

We’ll pay to replace or restore electronic data that has been destroyed or corrupted by a covered cause of loss. This additional coverage does not apply to ‘stock’ of prepackaged software and electronic date integrated in the buildings structure because these items are specifically excepted from the Property not covered section of the BPP. The most we’ll pay is $2,500 per policy year, not per occurrence or location.

Question 15

7 BPP coverage extensions

Answer 15

The 7 BPP coverage extensions apply only if 80% or higher coinsurance or value reporting applies - as additional insurance no coinsurance:

1. Newly acquired or constructed property
2. Personal effects and property of others
3. Valuable papers and records (other than electronic data) - Cost of Research
4. Property off-premises
5. Outdoor property
6. Non-owned detachable trailers
7. Business personal property temporarily in portable storage units

Question 16

Newly acquired or constructed property

Answer 16

For up to 30 days:
a. You can apply up to $250,000 of your building coverage to any building being built on your premises or to any you acquire elsewhere if for similar use or for use as a warehouse and
b. You can apply up to $100,000 of your contents coverage at any acquired location (except fairs or exhibitions.
But, we’re going to charge you for that coverage

Question 17

Personal effects and property of others

Answer 17

You can apply your contents coverage to personal effects of you, your officers and your employees (except for loss by theft) and the personal property of others up to $2,500 (a very low limit) at each location.

Question 18

Valuable papers and records (other than electronic data) - Cost of Research

Answer 18

You can apply your contents coverage, up to $2,500 at each described premises, for cost of research to replace information and record other than electronic or magnetic media.

Question 19

Property off-premises

Answer 19

You can apply your contents coverage up to $10,000, to property other than stock, temporarily off-premises of not in or on a vehicle, in the care of a salesman, or at location owned, leased or operated by you the insured.

Question 20

Outdoor property

Answer 20

You can apply up to $1,000 (not over $250 for any one tree, shrub or plant) to outdoor fences, antennas, signs (not attached to building), trees, shrubs and plants, including debris removal, if damaged by fire, lightning, aircraft, riot or explosion (FLARE)

Question 21

Non-owned detachable trailers

Answer 21

You can apply up to $5,000 to trailers used in your business, in your care, custody, or control and for which you have a contractual responsibility to pay for loss or damage. There is no coverage for trailers while attached to motor vehicles , while being hitch or unhitched to a motor vehicle, or that become accidentally unhitched.

Question 22

Business personal property temporarily in portable storage units

Answer 22

You can apply up to $10,000 to property in a temporary portable storage unit if the unit is located within 100 feet of the building and the storage unit has been in use for less than 90 days.

Question 23

Limit of insurance

Answer 23

The most we’ll pay is the limit shown in the declarations page minus the deductible.

The most we’ll pay for an outdoor sign (whether or not attached to a building is $2,500 per sign. The outside signs endorsement provides higher limits and/or broader perils.

Question 24

Deductible

Answer 24

Standard deductible is $500, with rate credits for higher deductibles. The insurer only pays losses that exceed that deductible and then it pays up to the covered limit. The insured pays up to the deductible, plus the proportion of losses that exceed the coverage limit.

Question 25

Valuation

Answer 25

a. Small building loss - if you complied with the coinsurance clause, we’ll pay for replacement cost for losses of $2,500 or less except for losses to awnings, floor coverings, appliances and outdoor equipment and furniture
b. Stock that you’ve sold but not yet delivered will be valued at its sales price
c. glass at replacement cost, with safety glazing if required

d. tenant’s improvements and betterments:
1. at ACV if you repair them promptly
2. at your original costs times the number of days left in your lease including renewal options, divided by the number of days from when you installed them to the end of your lease option; or
3. noting if others pay for their repair or replacement

Question 26

4 BPP optional coverages

Answer 26

1. Agreed value optional coverage
2. Inflation guard optional coverage
3. Replacement cost (RC) coverage
4. Extension of replacement cost coverage to property of others

Question 27

Agreed value optional coverage

Answer 27

waves the coinsurance clause until the statement of values (lists the ACVs of the property to be insured) expires (annually). If the coverage option is not renewing the coinsurance condition is reinstated. Covered losses are paid in full, each subject to the deductible .
To put agreed value coverage into effect:
a. the insured must submit a statement of values to the insurer and
b. the insurer must consent to agreed value coverage.

If the insurance limit is

Question 28

Inflation guard optional coverage

Answer 28

increases the insurance limit, pro-rata, by the annual percentage shown in the declarations. Advantage: It helps maintain adequate coverage during period of high economic inflation.

Question 29

Replacement cost (RC) coverage

Answer 29

Is made available when insurer is willing to assume the increased moral hazard inherent in RC coverage. There is usually no additional charge, but the insured needs a higher coverage limit since the coinsurance clause if then based on the higher RE - even if settlement is made based on ACV because the property is not repaired or replaced. Property not covered at RC include property of others (available by extension), residence contents, manuscripts, works of art, antiques, rare artifacts, and stock. Improvements and betterments are covered. To start, the insured may base his claim on AVC. If so, he has 180 days from the date of loss to notify the insurer of his intent to switch to replacement cost coverage. Then, he must repair or replace the property as soon as reasonably possible to receive RC coverage.

Question 30

Extension of replacement cost coverage to property of others

Answer 30

Covers personal property of other for which the insured is legally liable for loss or damage, up to the amount for which the insured is legally liable. The extension of replacement cost coverage to property of others responds to the contracts the insured has entered into that require the insured to cover property of other on a replacement cost basis.