Unit 11 Commercial Property Insurance

Question 1

A commercial property policy must include: (4)

Answer 1

1. Declarations Form
2. Conditions Form
3. Property Coverage Forms
4. Cause of Loss Form
5. Mandatory Endorsements (if applicable)

Question 2

The commercial property ____ form provides additional information about the premises to be insured and the specific property forms that will apply. It also includes the name and addresses of any mortgage or lienholders.

Answer 2

Declarations

Question 3

The commercial property ____ forms contain descriptions of the specific coverages being provided to the business. Each commercial property coverage form defines what property is covered, what property is not covered, how limits and deductibles apply, and what special conditions apply.

Answer 3

Coverage

Question 4

The ____ forms list the perils that the property is insured against. There are three separate causes of loss forms: basic, broad, and special (open).

Answer 4

Causes of Loss

Question 5

Attached to every commercial property policy, the ____ form establishes the policy provisions with respect to the following issues:
- Control of property
- Legal action against the insurer
- Other insurance
- Policy period and coverage territory
- Transfer of recovery rights against others
(subrogation)
- Concealment, misrepresentation, and fraud
- No benefit to bailee
- Insurance under two or more coverages
- Liberalization

Answer 5

Conditions

Question 6

The ____ condition states that an act of neglect of a person beyond the insured’s direction or control will not affect the insurance. In addition, if the insured violates a condition of the policy with regard to a specific location, the insurance applicable to other locations will not be affected.

Answer 6

Control of Property Condition

Question 7

The ____ condition gives the insured two years from the date that direct physical loss occurred to bring an action against the insurer. Such an action cannot be brought unless the insured has complied with all conditions of the policy.

Answer 7

Legal Action Against Us Condition

Question 8

The ____ condition states that when there is other insurance written on the same basis, the policy pro rates with the other polices. If there is other insurance covering the same loss but subject to a different plan or coverage, the policy is excess over the other insurance.

Answer 8

Other Insurance Condition

Question 9

The ____ condition states that a loss must occur during the policy period and in the coverage territory to be covered. The coverage territory is usually the US, its territories and possessions, Puerto Rico, and Canada.

Answer 9

Policy Period, Coverage Territory Condition

Question 10

The ____ condition gives the insurance company subrogation rights.

Answer 10

Transfer of Rights of Recovery Against Others to Us

Question 11

The ____ condition prohibits a bailee from being reimbursed by the insured’s commercial property insurance if the insured’s property is damaged or destroyed while in the bailee’s custody. Remember, a business is a bailee when they have care, custody, and control of a customer’s property.

Answer 11

No Benefit to Bailee

Question 12

The ____ condition states that any revision that broadens coverage without requiring additional premium will automatically apply to the coverage part if the revision is adopted by the insurer during the policy period or within ____ of the policy’s effective date.

Answer 12

Liberalization Condition, 45

Question 13

The most commonly purchased form, and the form that is the core of the commercial property coverage part, is the ____ form. It covers buildings, the insured’s business personal property, and the personal property of others located at the business premises. The insured may select coverage for one or more of these categories. Coverage is only provided for coverages that have a limit of insurance shown in the declarations.

Answer 13

Building and Personal Property Coverage Form

Question 14

Building property coverage: (6)

Answer 14

1. Completed additions
2. Fixtures, including outdoor fixtures
3. Permanently installed machinery and equipment
4. Personal property like fire extinguishers
5. Outdoor furniture, floor coverings, and certain appliances
6. Additions under construction and alterations or repairs to the building including temporary structures

Question 15

Business personal property is covered while it is in the building, in the open, or in a vehicle within ____ feet of the premises.

Answer 15

100 Feet

Question 16

Business personal property is covered while it is in the building, in the open, or in a vehicle within ____ feet of the premises. It includes (7)

Answer 16

100 Feet
1. Furniture
2. Fixtures
3. Machinery/equipment
4. Stock
5. The value of labor, parts, or services on the personal property of a customer
6. If the insured is a tenant, the improvements and betterments added by the insured
7. Leased personal property (copying machine) that the insured has a contractual responsibility to insure, unless it’s otherwise covered

Question 17

Signs that ARE ATTACHED to the building are covered for up to $____.

Answer 17

$2500

Question 18

Property Not Covered: (11)

Answer 18

1. Money, accounts, food stamps, notes, and securities
2. Animals, unless they are boarded or held for sale
3. Bridges, roads, walks, patios, and other paved surfaces
4. Contraband
5. Cost of excavations
6. Foundations of buildings, structures, and machinery
7. Land
8. Retaining walls that are not part of a building
9. Bulkheads, pilings, piers, wharves, and docks
10. Vehicles licensed for use on public roads or operated away from premises
11. Fences, antennas, signs not attached to building, trees/shrubs/plants

Question 19

A stated value, usually ____% of the amount of the loss plus the deductible, is what the policy will pay toward removing the debris. If removal costs are more than that amount or the actual loss plus the debris removal is more than the limit of the policy, then an additional $____ per occurrence is available.

Answer 19

25%, $25k

Question 20

Preservation of property pays for loss to property that was removed from the insured location to protect it from a peril insured against. Coverage only applies if the loss occurs within ____ days after the property was removed.

Answer 20

30 Days

Question 21

Fire department service charge pays up to $____ for a fire department service charge. This is paid in addition to the limit of insurance, no deductible applies.

Answer 21

$1000

Question 22

Pollutant cleanup and removal covers the cost to extract pollutants from land or water at the insured’s premises if the pollution was caused by a covered loss. This cover is subject to a $____ limit per policy period and applies in addition to the policy limit. The expenses must be reported to the insurer in writing within ____ days of the loss.

Answer 22

$10,000 180 Days

Question 23

The electronic data additional coverage pays to replace or restore electronic data that has been destroyed or corrupted by a covered cause of loss. The most that will be paid under this additional coverage is $____ for all loss or damage sustained in any one policy year.

Answer 23

$2500

Question 24

There are also certain coverage extensions that apply but only if the insured has agreed to meet an ____% or higher coinsurance requirement or has purchased a reporting form. The extensions apply to property located in or on the building described in the declarations, in the open, or in a vehicle within ____ feet of the described premises.

Answer 24

80%

Question 25

Under the ____ coverage extension, if the insured acquires a building at another location or builds a new building on the described premises, the newly acquired or constructed buildings are covered under the policy’s building coverage for up to $____ at each location. Coverage for newly acquired business personal property is $____ at each location.

Answer 25

1. Newly Acquired or Constructed Property
2. $250k
3. $100k

Question 26

Personal effects and property of others provides up to $____ of coverage for personal effects of the named insured, partners, and employees(excluding loss from theft) and personal property of others.

Answer 26

$2500

Question 27

Valuable papers and records - other than electronic data pays up to $____ to replace or restore information on damaged valuable papers and records.

Answer 27

$2500

Question 28

Property off-premises extends up to $____ in coverage for covered property that is away from the described premises. Coverage is provided while the property is: (3)
*Clue - not while in a vehicle and not in the care of a salesperson unless the salesman is at a….

Answer 28

1. 10k
2. Temporarily at a location the insured does not own, lease or operate
3. In storage at a location the insured leases
4. At a fair, trade show, or exhibition

Question 29

Outdoor property extends a limited amount of coverage to fences, antennas, satellite dishes, trees, plants, and shrubs. The maximum payable is $____ with a $____ limit applying to any one tree, plant, or shrub.

Answer 29

$1000, $250

Question 30

What is the limit for a nonowned detached trailer?

Answer 30

$5000

Question 31

Conditions - the duties in the event of loss states that after a loss, the insured must: (6)

Answer 31

1. Prompt notice of loss
2. Notify the police if a crime
3. Protect property from further damage
4. Provide the company an inventory of damaged property
5. Allow insurer to inspect damage
6. Signed proof of loss within 60 days (if requested)

Question 32

The loss payment condition states that within ____ days after the insurer receives the sworn statement it will make the payment.

Answer 32

30 Days

Question 33

The valuation condition describes how losses will be settled. Most losses are paid at ____ value. However, if the coinsurance conditions are met and costs are $____ or less, the policy will pay the cost of building repair or replacement without taking depreciation into account. ____ already sold is valued at its net selling price. Tenants’ improvements and betterments are valued at ____ value.

Answer 33

1. ACV
2. $2500
3. Stock
4. ACV

Question 34

The vacancy condition states that if a building has been vacant for more than ____ consecutive days before the loss, the insurer will not pay for a loss due to vandalism, water damage, theft or attempted theft, building glass breakage, or sprinkler leakage (unless the system has been protected against freezing). In addition, any amount that would otherwise be paid for a covered loss will be reduced by %____. Note that buildings under construction are not considered vacant.

Answer 34

60, 15%

Question 35

The mortgage holder condition promises to pay losses to any mortgage or lien holders named in the declarations as their interest may appear. The insurer must provide ____ days’ written notice if it cancels for nonpayment of premium and ____ day’s notice if it cancels for any other reason allowed by the policy. If the insurer decides not to renew, it must give the mortgage or lien holder at least ____ days’ advance written notice.

Answer 35

10, 20, 10

Question 36

____ - This form covers commercial, residential, or farm buildings that are under construction. Coverage includes both the building under construction and its foundation. Fixtures, machinery, equipment used to service the building, and the insured’s building materials and supplies can be covered if they will become a permanent part of the building and are within ____ feet of the building.

Answer 36

Builders Risk Coverage Form, 100 Feet

Question 37

Builders risk coverage form can be extended to cover building materials and supplies owned by others but in the insured’s care, custody, or control, provided they are within ____ feet of the described building. The most that will be paid under this extension is $____.

Answer 37

100 Feet, $5000

Question 38

Builders Risk Coverage Form - Coverage ends when one of the following first occurs:
- Policy expires or is canceled
- Property is accepted by the purchaser
- Interest in property ceases
- Construction is abandoned
* ____ days after completion of construction
* ____ days after the building is occupied in whole or in
part or put to the intended use

Answer 38

90, 60

Question 39

Builders Risk Coverage Form - Is the following covered?
- Land or water
- Lawns, trees, shrubs, or plants when outside of buildings
- Radio and television antennas when outside of buildings, including lead-in wiring, masts or towers
- Signs not attached to buildings

Answer 39

No

Question 40

True or False: The Condominium Commercial Unit-Owners Coverage Form covers buildings.

Answer 40

False, the Condo Association Coverage Form covers buildings

Question 41

Business Income Coverage Forms: ____ means a slowdown or cessation of the insured’s business activities

Answer 41

Suspension

Question 42

Business Income Coverage Forms: this coverage is known as ____ coverage since it provides coverage for the loss of business income over a period of time that resulted from direct physical loss. Business income includes net income that would have been earned if the loss had not occurred and the costs of continuing normal operations, including payroll.

Answer 42

Time Element Coverage

Question 43

____ is a coverage that reimburses the insured for expenses incurred to keep a business going after a loss caused by a specific peril. This coverage is for a business that must continue at all costs (newspaper or bank)

Answer 43

Extra Expense Coverage

Question 44

____ Coverage: Covers necessary expenses to avoid further loss of income.

Answer 44

Expenses to Reduce Loss

Question 45

With either of the business income forms, the insured may select: (3)

Answer 45

1. Business income coverage, inclduing rental value coverage
2. Business income coverage, other than rental value coverage
3. Rental value coverage only

Question 46

Business Income - Options: The ____ option gives the insured extended business income coverage for the number of days stated in the declarations, rather than the standard ____ days allowed by the extended business income additional coverage.

Answer 46

Extended Period of Indemnity Option, 60

Question 47

Business Income - Options: The ____ optional coverage limits reimbursement for extra expenses or loss of business income to no more than the amount of loss incurred during the first 120 days following the direct loss.

Answer 47

Maximum Period of Indemnity

Question 48

Monthly Limit of Indemnity Option: Insured selects a fraction that is multiplied by the limit of insurance to determine the maximum that could be paid for each ____ days.

Answer 48

30 Days

Question 49

Business Income - Options: ____ establishes a yearly amount of agree coverage.

Answer 49

Agreed Value

Question 50

Business Income - Options: Which option is subject to coinsurance?

Answer 50

Extended Period of Indemnity

Question 51

What is a Business Income from Dependent Properties - Broad Form?

Answer 51

It’s basically protection from…when a business that you rely on fails resulting in a loss of income.

Question 52

Insured who depend on another business as their sole supply of merchandise or raw materials may suffer a loss if their supplier is forced to cut back or eliminate shipments because of a direct physical loss. These businesses are known as a ____ location.

Answer 52

Contributing

Question 53

Insureds that depend on a particular business as a primary buyer for their products are covered under this form if direct physical loss at such a ____ location causes the insured’s earnings to suffer.

Answer 53

Recipient

Question 54

Insureds may depend on a manufacturer to deliver certain products or components to the insured’s customers under a sales contract. Should the ____ location be unable to fulfill the contract because of direct physical loss, the insureds may suffer a loss of income that can be covered under this form.

Answer 54

Manufacturing

Question 55

Insureds may depend on another business to attract customers to their own business. Loss to such a ____ location may cause insureds to suffer a loss of earnings that can be covered under this form.

Answer 55

Leader

Question 56

Extra Expense Coverage Forms:
- 30 days or less, ____% of the full amount of insurance would be paid
- 31-60 days, ____% of the full amount of insurance would be paid
- Over 60 days, ____% of full amount of insurance would be paid

Answer 56

40%, 80%, 100%

Question 57

____ Coverage Form: Covers property of others only if insured is legally liable

Answer 57

Legal

Question 58

Which 3 perils in Broad Commercial Coverage separates it from Broad personal coverage?

Answer 58

1. Fungus, wet rot, and bacteria
2. Sinkhole collapse
3. Sprinkler leakage

Question 59

Which acronym is used to add perils to Broad Form Commercial Coverage and which peril is broadened?

Answer 59

BIG AFFECT, Collapse

Question 60

Name the additional Collapse peril causes: (6)

Answer 60

1. Breakage of glass
2. Hidden decay
3. Hidden insect or vermin damage
4. Weight of people or personal property
5. Weight of rain that collects on a roof
6. Use of defective material or methods of construction if the collapse occurs while the construction, remodeling, or renovation is in progress

Question 61

Name the 13 Special Form Exclusions

Answer 61

1. Wear and tear
2. Rust, corrosion, fungus, decay, deterioration, and hidden or latent defects
3. Smog
4. Pollutants
5. Settling, cracking, shrinking, or expansion
6. Damage caused by insects, birds, rodents, etc.
7. Mechanical breakdown
8. Explosion of steam boilers, pipes, and engines
9. Dishonest or criminal acts by employees
10. Voluntary parting with property if induced by fraud or trick
11. Rain, snow, ice, or sleet damage to personal property that is not in the building
12. Loss resulting from acts or decisions, or the failure to act or decide
13. Faulty planning, development, design, specifications, workmanship, or repair

Question 62

According to the commercial property policy, volcanic blasts or shockwaves, ash, dust, particulate matter, and lava flow is best described as ____.

Answer 62

Volcanic Action