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Insurance Adjusting > 4/E - Commercial Package Policies > Flashcards

4/E - Commercial Package Policies Flashcards

1
Q

Commercial Package Policies

A

A Commercial Package Policy (CPP) combines two or more lines of commercial insurance into a single insurance contract.

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2
Q

Benefits to policyholders

A
  • Simplicity
    a. One policy for all needs
    b. One common dec page, one common
    conditions page
    c. Interline endorsements
  • Elimination of gaps in coverage
  • Reduced premiums

Benefits to insurers:

  • Less diverse selection of lines
  • Customer loyalty strengthened
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3
Q

Representative Lines of Coverage

A
  • Commercial property
  • Commercial general liability
  • Employment related liability
  • Professional liability
  • Commercial crime and employee dishonesty
  • Commercial inland marine
  • Business auto
  • Boiler and machinery
  • Equipment breakdown

Lines not available:

  • Workers’ comp
  • Health
  • Life
  • Disability
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4
Q

What is a BOP?

A

A Business Owner Package bundles property, liability, and income protection in a single package.

Insurance to value requirement
Not technically called “coinsurance,” but works in the same way:
- Policy pays RC if coverage is at least 80% of property’s value
- If coverage is less than 80% of property’s value, policy pays the higher of:
a. ACV
b. Replacement cost X (Amount of insurance/80% of property value)

Notice that this is the same as the coinsurance penalty equation:
(Insurance carried/Insurance needed to meet coinsurance requirement) X Amount of loss

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5
Q

BOP Overview

A

Features of the typical BOP:

  • 12 months business income coverage
  • 12 months extra expense coverage
  • Inflation guard for buildings and structures
  • Liability protection for lawsuits from accidents or products
  • Slander and copyright protection
  • Deductibles on most claims
  • RC valuation
    a. ACV endorsement option
  • Open-peril coverage
    b. Named-peril endorsement option

Not typically included:

  • Coverage for company owned vehicles
  • Professional liability coverage
  • Malpractice coverage
  • Many insurers follow similar eligibility guidelines, but many write their own
  • Adjusters must study each BOP carefully when investigating claims
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6
Q

BOP Eligibility

A

Eligibility is involved in these businesses:

  • wholesalers and distributors
  • processing and service businesses
  • limited cooking and fast food restaurants
  • convenience stores with or without gasoline
  • self storage facilities
  • specialty contractors
  • motels
  • apartment house & condominium association buildings
  • office buildings
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7
Q

Wholesalers & Distributors

A

BOP qualifications

  • Retail sales account for 25% or less of gross income
  • 25% or less of floor space is available to general public
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8
Q

Processing & Servicing Businesses

A

BOP qualifications:

  • Annual sales are under $3 million
  • No more than 25% of sales occur off-premises
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9
Q

Limited Cooking, Convenience

A 
Limited Cooking and Fast Food Restaurant
BOP qualifications:
- 7500 square feet or fewer
- Max seating:
   a. Limited Cooking: 75
   b. Fast Food: 150
- Beer and wine sales no more than 25% annual income
- No liquor sales
- Maintenance of fire extinguishing equipment
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10
Q

Convenience Store

A

BOP qualifications:

  • Gasoline sales less than 75% annual income
  • No auto repair or car wash
  • No propane or kerosene sales
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11
Q

Self Storage Faciliity

A

BOP qualifications:

  • Maximum of two stories (but floor space not limited)
  • No storage of pollutants, waste, chemicals, industrial materials
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12
Q

Specialty Contractors

A

BOP qualifications:

  • Annual payroll no more than $300,000
  • Annual sales no more than $3,000,000
  • Subcontracted work no more than 10% total sales
  • No heavy construction
  • No working on buildings over three stories
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13
Q

Motels

A

BOP qualifications:

  • Maximum three floors
  • No bars or cocktail lounges
  • Not seasonal
  • Not closed more than 30 days per year
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14
Q

Apartment Building and Condominium

A

BOP eligibility:

  • Occupancy must be residential or office
  • Incidental occupancy no more than 25,000 square feet
  • Incidental occupancy by contractors not exceeding 7,500 sq ft or 15%

Note - Incidental occupants are businesses or offices

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15
Q

Office Building

A

BOP qualifications:

  • Less than 100,000 sq ft
  • No higher than six stories
  • Tenants occupy no more than 25,000 sq ft
  • Contractors occupy no more than 7,500 sq ft or 15% of total sq ft
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16
Q

Ineligible Businesses

A

Ineligible for a BOP:

  • Car dealerships, service stations, repair shops
  • Parking lots, garages
  • Amusement parks
  • Bars, nightclubs, and the like
  • Banks and similar financial institutions
  • Manufacturing, processing, servicing businesses (except those eligible)
  • Condominium associations (except residential and office)

Note - No coverage for household personal property with BOP

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17
Q

BOP structure

A
  • Section I - Property
    a. Coverage A
    b. Coverage B
    c. Additional Coverage
    d. Extensions to Coverage
  • Section II - Liability
    a. Coverages
  • Section III - Common Policy Conditions
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18
Q

Coverage A: Buildings and Structures

A
  • Buildings and structures on dec page
  • Additions completed or under construction and construction materials
  • Fixtures, equipment, machinery permanently installed
  • Building maintenance equipment
  • Flooring, floor coverings
  • Heating, ventilating, refrigerating, cooking, washing equipment
  • Outdoor fixtures
  • Owner’s furniture in apartment rented as furnished
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19
Q

Coverage B: Business Personal Property

A
  • Furniture belonging to the business
  • Loose fixtures, machinery, office equipment, stock
  • Other personal property owned and used by business
  • Improvements made at a tenant’s own expense
  • Leased business personal property that must be insured
  • Business personal property in the open or in a vehicle 100 feet away
  • Value of labor, service, materials arranged for others’ personal property
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20
Q

Coverage A and B Exclusions

A
  • Currency, stock certificates, bullion
  • Vehicles and aircraft that must be registered
  • Watercraft while in water
  • Contraband and property being illegally shipped or traded
  • Land, water, lawns, crops
  • Outdoor antennas unless under building extensions
  • Trees and other plants unless under extensions
21
Q

Property: Additional Coverage

A

Additional Coverage at no extra charge:

  • Inflation guard
  • Debris removal
  • Preservation of property
  • Fire department service
  • Business income, extra expense
  • Pollution cleanup
  • Civil authority action
  • Seasonal increase
  • Electronic data, computer operation interruption
  • Fire extinguisher recharge
  • Fungi, rot, bacteria
  • Business income from property dependent on it
  • Increased construction costs
  • Collapse
  • Glass
  • Forgery
  • Counterfeit money
22
Q

Inflation Guard, Debris, Preservation of Property, Fire Dept. Service Charge

A

Inflation Guard:
- Annually increases coverage for buildings automatically
Debris Removal:
- Pays for debris
- Pays if covered loss caused the debris
- Pays if debris is reported within 180 days from date of loss
Preservation of Property:
- For expense of protecting property from impending covered peril
Fire Department Service Charge:
- Covers charges for emergency services to protect property
- Requires no deductible

23
Q

Income, Extra Expense, Pollution

A

Business Income coverage:

  • Protects from loss of income caused by property damage
  • Starts 72 hours after damage occurs
  • Continues until normal business can resume, for up to 12 months

Extra Expense coverage:

  • Pays to keep business going after property loss
  • Begins immediately
  • Provides up to 12 months’ coverage, or until business can operate

Pollution Cleanup and Removal:

  • Covers pollution damage caused by loss from covered peril
  • Indemnifies for cost to clean up pollutants from land or water
  • Pays only if insurer is notified within 180 days of the loss
24
Q

Electronic Data and Computer Operations Interruption

A

Electronic Data coverage:

  • Indemnifies for replacing or repairing data destroyed by a covered peril
  • Causes of loss can be viruses, harmful code
  • Does not apply if an employee caused damage

Computer Operations Interruption:

  • Covers income lost if computer stops working
  • Covered causes include viruses and harmful code
  • Does not cover damage caused by employees
25
Q

Fire Extinguisher Recharge, Fungi, Rot and Bacteria Coverage

A

Fire Extinguisher Recharge coverage:
- Pays for accidental discharge, but not if during test or installation

Fungi, Rot, and Bacteria coverage:

  • Is for specific perils only
  • Pays cost of property tear-out and replacement
26
Q

Contingent Business Interruption, Construction Costs

A

Business Income from Dependent Properties:

  • Is also called Contingent Business Interruption
  • Covers income lost when suppliers suffer damage affecting the insured
  • Covers income lost when business’s customers suffer damage affecting the insured

Increased Cost of Construction:
- Is for cost of bringing property up to code after a covered loss

27
Q

Collapse, Glass, Counterfeit Currency and Forgery

A
  • Collapse coverage covers specific perils: not natural deterioration
  • Glass Expense pays to board up broken windows, doors
  • Counterfeit Currency coverage protects against good faith acceptance of faked money orders or cash
  • Forgery or Alterations covers losses from forged checks
28
Q

BOP Extensions

A

Business Owners Policies contain many eligibility factors, additional coverages, extensions, and other parts that can make examining claims quite challenging.

29
Q

Newly Acquired or Constructed Buildings

A
  • Coverage for 30 days
  • Applies to:
    a. New buildings under construction
    b. Newly acquired properties off the insured premises
30
Q

Personal Property Off-Premises

A
  • For business personal property

- For property in transit

31
Q

Personal Effects

A
  • Covers personal property under the insured’s care, if damage is on insured property
  • Does not cover theft
32
Q

Outdoor Property

A

Examples of eligible property:

  • Fences
  • Satellite dishes
  • Antennas
  • Detached signs
  • Trees, shrubs, and plants

Covered Causes of Loss

  • Fire
  • Lightning
  • Explosion
  • Riot or civil commotion
  • Aircraft
33
Q

Valuable Papers and Records

A

Covers the cost of replacing papers or computer records destroyed by a covered peril

34
Q

Accounts Receivable

A
  • Provides coverage for accounts the insured expects to collect, but cannot because of damage to account records by a covered peril
  • Applies even if the records were off-premises at time of damage
35
Q

Liability

A

Liability Coverage in a Business Owners Policy:

  • Is provided on Occurrence Form basis
    a. Occurrence Form: covers damages occurring during policy term, no matter when claim is filed
  • Covers liability for bodily injury and property damage from business operations and premises
  • Covers product and operations liability
  • Has aggregate limits like those in CGL
36
Q

Liability Limits

A

Per Occurrence Limit:
- Typically $30,000, $500,000, $1 million, $2 million
- Applies per occurrence for bodily injury/physical damage
- Applies per person for personal/advertising injury
General Aggregate Limit: twice the per occurrence limit
Products-Completed Operations Aggregate Limit: twice the per occurrence limit
Damage to Premises Rented by You: usually starts at $50,000 per occurrence
Medical Payments: usually starts $5,000 per person

37
Q

Possible Limits to Liability Claims

A
  • Selected Per Occurrence Liability: $500,000
  • General Aggregate: $1,000,000
  • Products-Completed Operations: $1,000,000
  • Per Occurrence (Liability and Medical Expenses): $500,000
  • Per Person (Personal and Advertising Injury): $500,000
  • Medical Payments Limit: $5,000
  • Damages to Premises Rented by You: $50,000
38
Q

Supplementary Payments

A

In conjunction with liability include:

  • Costs for defending and investigating claims against insured
  • Cost of bail bonds when accident involves a vehicle for which bodily injury applies
  • Bail bonds to release attachments
  • Costs taxed against the insured
  • Prejudgment interest
  • Interest accrued after judgment, before insurer pays
39
Q

Liability Exclusions

A
  • Injury caused by legal, medical, pharmacy services
  • Expected or intentional injuries by insured, unless defensive
  • Employee injuries
  • Automobiles, aircraft, watercraft liability
  • Contract, liquor, transportation of mobile equipment liability
  • Pollutants, war, terrorist attack
  • Property of insured, loaned to insured, or in insured’s care
  • Property damage to insured’s work, products, data
  • Product recall, work recall
40
Q

Section III - Conditions:

A
  1. Cancellation/Non-renewal: Sets rights and duties of both insurer and insured if either cancels
  2. Changes to Policy: Changes must be made by endorsement with the agreement of both parties
  3. Concealment, Misrepresentation, Fraud: These void coverage
  4. Examination of Records: Insurer has right to inspect business records up to three years after policy expires.
  5. Inspections and Surveys: Insurer may inspect premises any time and recommend changes.
  6. Liberalization: Allows insured to be covered for no increased premium if insurer broadens coverage
  7. Premium Notices: Insured must pay all premiums and insurer will send notices to insured
  8. Premium Audit: Then at end of policy term, insurer audits actual exposure and calculates actual premium
  9. Transfer of Right of Recovery: Subrogation - insured transfers to the insurers the right to collect from third party
  10. Transfer of Your Rights Under This Policy: Insured cannot transfer rights to policy benefits to another person. If insured dies, rights can transfer to insured’s legal representative.
41
Q

BOP Exclusions

A

A Business Owners Policy’s open-peril coverage means the insurer must prove any damage was excluded if a claim is denied

  • Therefore, BOP exclusions are thorough
  • An adjuster must examine exclusions with great care
42
Q

Typical BOP Exclusions

A
  • Dishonest, illegal or criminal acts by the insured
  • Operations executed by the government or governmental authority
  • Enforcement of ordinance or law
  • War and military action
  • Explosions of boilers and steam equipment
  • Wear and tear, including deterioration
  • Power failure
  • Earthquakes
  • Water damage by continuous leakage or seeping over a period of fourteen days or more
  • Nuclear hazards
  • Settling, shrinking, expansion or cracking of foundations, floors or ceilings
  • Interruption or surge of artificially generated electric power supply
  • Pollution
  • Neglect of property
  • Unexplained disappearance of property
43
Q

BOP Endorsements

A

A business owner can add needed coverage by Endorsements.

44
Q

Named-Peril Endorsement

A

Covered perils:

  • Fire and lightning
  • Windstorm and hail
  • Explosions
  • Smoke
  • Aircraft or vehicles
  • Riot or civil commotion
  • Vandalism
  • Sprinkler leakage
  • Sinkhole collapse
  • Volcanic action
  • Transportation, if by
    a. Collision, derailment, or overturn
    b. Stranding or sinking of vessels
    c. Collapse of bridges, docks, or piers
45
Q

Outdoor Signs and Equipment Breakdown

A

Outdoor Signs Endorsement: provides open-peril coverage for signs unattached to building

Equipment Breakdown Endorsement: covers boilers, steamers, refrigeration systems, etc.

46
Q

Spoilage, Burglary and Robbery, & Employee Dishonesty Endorsements

A

Spoilage Endorsement: covers perishable stock spoiled by refrigerator breakdown, contamination by refrigerants, or power loss

Burglary and Robbery: covers losses due to theft by burglars or robbers

Employee Dishonesty:

  • Covers losses from theft by employees
  • Applies up to year after policy expires
47
Q

Protective Safeguards, and Ordinance or Law Endorsements

A

Protective Safeguards Endorsement:

  • States that protective devices must be operating in order for coverage to apply
  • Insured has 48 hours to notify insurer of problems with protective devices

Ordinance or Law Endorsement: indemnifies for extra expense of bringing damaged property up to current building and safety codes

48
Q

Utility Services-Direct Damage and Utility Time Element Endorsements

A

Utility Services-Direct Damage Endorsement: covers losses caused by an interruption in utility services if provider is damaged

Utility Time Element Endorsement: covers lost business income and extra expenses due to loss of utilities

49
Q

Hired Auto & Non-owned Auto Liability Endorsements

A

Hired Auto Liability Endorsement:

  • Adds coverage for rented, leased, and borrowed vehicles
  • Covers liability for accidents happening while on business

Non-owned Auto Liability Endorsement:

  • Adds coverage for unowned vehicles when used for business
  • Example: pizza delivery driver who uses his own car

Insurance Adjusting (46 decks)

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