Chapter 1

Question 1

1-1 What are the components of s commercial property loss exposure?

Answer 1

1) property type, 2) cause of loss, 3) financial consequences of property losses

Question 2

1-2 What is the difference between real property and personal property?

Answer 2

Real property is tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land Everything else is personal property.

Question 3

1-3 What are the four classifications of property for insurance purposes?

Answer 3

1) contents, 2) property in transit, 3) property in the possession of others, 4) “floating” property

Question 4

1-4 Explain how a cause of loss affects property.

Answer 4

Adversely affects and leaves in an altered state. Thefts do not alter property but affect the owner’s ability to use it.

Question 5

1-5 Identify the three main adverse financial consequences of property loss exposures

Answer 5

1) reduction in value, 2) lost income, 3) extra expense

Question 6

1-6 Identify the components of a commercial property coverage part.

Answer 6

Declarations, coverage form(s), causes of loss form(s), commercial property conditions, endorsements

Question 7

1-7 What information is contained on a commercial property declarations page that pertains specifically to property insurance?

Answer 7

Description of property, kinds and amounts of coverage and causes of loss, list of mortgagees, deductible amount, list of coverage forms and endorsements, co insurance percentage(s), any optional coverages

Question 8

1-8. Identify the typical elements of a commercial property coverage form.

Answer 8

Insuring agreement, delineation of the property covered and not covered, additional coverages and coverage extensions, provisions and definite that apply only to that coverage form.

Question 9

1-9 Identify the three types of causes of loss forms.

Answer 9

Basic, broad, special

Question 10

2-1 Identify the three broad categories of property covered by the BPP.

Answer 10

Building, Your Business Personal Property, Personal Property of Others

Question 11

2-2 What elements are included in the BPPs definition of building?

Answer 11

Buildings or structures listed and described in the declarations; completed additions to covered buildings; fixtures (including outdoor); permanently installed machinery and equipment; personal property owned by the insured and used to maintain or service the building premises.

Question 12

2-3 in order to be insured under the BPP, where must Your Business Personal Property be located?

Answer 12

Except for an extension that provides limited coverage for property while away from the premises, coverage applies only when the property is located in or on the described building or in the open (or in vehicle) within 100 feet of the building structure or within 100 feet of the described premises, whichever distance is greater.

Question 13

2-4 Identify a potential negative consequence of ignoring improvements and betterments when setting the amount of insurance a tenant should carry.

Answer 13

Severe underinsurance difficulties when a loss occurs

Question 14

2-5 What is the purpose of coverage for Personal Property of Others?

Answer 14

Protect the insured against loss or damage to the personal property of others while such property is in the custody of the insured.

Question 15

2-6 Identify reasons why the BPP excludes some kinds of property from coverage.

Answer 15

Illegal to insure; less susceptible to loss by most of the perils insured against; better covered elsewhere.

Question 16

3-1 Identify the three methods an insured can use to increase the limit of insurance for BPP.

Answer 16

Showing a higher limit in the declarations, adding an appropriate coverage endorsement, or buying another type of policy to supplement the BPP.

Question 17

3-2 Explain the purpose of the BPPs Debris Removal additional coverage.

Answer 17

Covers the cost of removing debris of covered oriole try resulting from a covered loss during the policy period. In some cases, the cost to remove debris of property that is not covered is also covered.

Question 18

3-3 identify the circumstance under which the BPPs Preservation of Property addition coverage covers property.

Answer 18

Extends policy to protect covered property while it is being moved and up to 30 days at a new location.

Question 19

3-4 Explain the purpose of BPPs pollutant cleanup and removal additional coverage.

Answer 19

Provide limited coverage for the cleanup and removal of pollutants from land or water at the described premises.

Question 20

3-5 Why does the BPP exclude electronic data in most instances except as provided by the Electronic Data additional coverage.

Answer 20

Businesses are becoming increasingly reliant on electronic data and many insurers feel the exposure is better covered by other forms of insurance.

Question 21

3-6 Building with $2M in building and $1M BPP causes of loss special with rc. Firefighters disturbed stored chemicals and site was remediate day a cost of $45k. The insured reported within 45 days. Do additional coverages apply?

Answer 21

The policy limit plus additional coverage amount would be covered.

Question 22

4-1 List the covered causes of loss under Causes of Loss - basic form.

Answer 22

Fire, lightning, explosion, windstorm or hail, smoke, aircraft, vehicles, riot/civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Additional coverage is available for fungus, wet rot, dry rot, and bacteria.

Question 23

4-2 Identify the causes of loss that are excluded under Causes of loss - basic form.

Answer 23

Ordinance or law, earth movement, governmental action, nuclear hazard. Utility services, war, military action, water, fungus, wet rot, dry rot, bacteria, electrical, magnetic or electromagnetic energy, rupturing or bursting water pipes, leakage of water or steam, explosion of steam boilers, steam pips, steam turbines, or steam engines, mechanical breakdown, loss resulting from the neglect of the insured to use all reasonable means to save and preserve property at and after the time of loss.

Question 24

4-3 Identify the causes of loss that are covered under the broad form that are not covered under the basic form.

Answer 24

Falling objects, weight of ice, snow, sleep; water damage

Question 25

4-4 XYZ co has a causes of loss - basic form. Would these be covered? A) windstorm damage to roof, b) river overflowed and damaged flooring, c) vandals broke windows, d) earthquake caused structural damage

Answer 25

A) yes B) no C) yes D) no

Question 26

5-1 identify the advantages to the insured of purchasing the causes of loss - special form.

Answer 26

Certain causes of loss omitted or excluded under broad form are not excluded; by covering direct physical losses other than those excluded, it covers losses the insure may not have anticipated; special form shifts the burden of proof from the insured to the insurer.

Question 27

5-2 Identify examples of perils that the special form specifically excludes.

Answer 27

Wear & tear; rust, corrosion, decay, deterioration, or hidden/latent defect; smog; settling, shrinking, or expansion; infestations and waste products of insects, birds, rodents, or other animals; mechanical breakdown; dampness or dryness of atmosphere, changes or extreme temperatures, or marring/scratching (personal property only)

Question 28

5-3 Identify the purpose of the Loss or Damage to Products exclusion.

Answer 28

Eliminates coverage for damage to merchandise , goods, or other products, resulting from production errors (ex. Bad batch of beer)

Question 29

5-4 Identify examples of theft-related acts for which coverage is excluded under the special form

Answer 29

Dishonest or criminal acts (including theft) of the insured or of partners, members, officers, managers, directors, or employees of the insured; voluntary surrendering of property as the result of a fraudulent scheme or trickery; loss by theft of construction materials not attaches as part of a building; mysterious disappearance only evidenced by inventory shortage.

Question 30

5-5 Describe the characteristics of property that qualifies as Property in Transit under the BPP.

Answer 30

Must be in or on a motor vehicle owned, leased, or operated by the insured and cannot be in the custody of the insured’s sales personnel.

Question 31

5-6 Jones Co’s building and BPP are covered by a broad form. When they renew their insurance they will purchase special form coverage. How will coverage be changed?

Answer 31

Will have coverage for accidental and unforeseen risks of direct physical loss subject to exclusions and limitations expressed in the form.

Question 32

6-1 Why is the amount the insurer pays for a loss covered under the BPP generally less than the applicable amount of insurance.

Answer 32

When specific limits are used, the dec lists a separate limit for each building and for property at each location. A blanket limit can apply one amount of insurance to all covered property.

Question 33

6-3 Explain how the BPP’s deductible is applied following a loss, if the loss exceeds the deductible shown on the dec.

Answer 33

Deductible is subtracted from the loss; not the policy limit

Question 34

6-4 Explain how the BPP’s deductible is applied when the occurrence involves loss to more than one item of covered property and when separate limits of insurance apply.

Answer 34

Losses are not combined in determining application of the deductible and only one deductible per occurrence applies.

Question 35

6-5 What is the standard deductible for the BPP?

Answer 35

$500

Question 36

6-6 Explain why underwriters prefer higher deductibles.

Answer 36

Save the expense of handling small claims.

Question 37

6-7 How would the following losses be valued. Structure: insured for $400k and $1,000 ded. a) $800 b) $25,000 c) $415,000

Answer 37

$0/$24,000/$400,000

Question 38

Real property

Answer 38

tangible property consisting of and, all structures permanently attached to the land, and whatever is growing on the land ex: buildings, land, underground property that is permanently attached to structure also considered (built-in appliances)piping, radio transmission towers

Question 39

Personal property

Answer 39

all tangible or intangible property that is not real property.

Question 40

Commercial property coverage part

Answer 40

Commercial package policy (CPP) coverage endorsement that provides a broad range of coverages to “middle market” or larger firms to insure buildings and business personal property

Question 41

CPP

Answer 41

Policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts

Question 42

Monoline policy

Answer 42

Policy that covers only one line of business

Question 43

Package modification factors

Answer 43

factors that are applied to the regular policy premiums for certain coverage parts of a CPP that includes both property and liability coverages, resulting in premium discounts for those coverage parts

Question 44

Commercial property declarations page

Answer 44

a required commercial property overage part component that provides basic information about the policyholder and the insurance provided.

Question 45

Commercial property coverage form

Answer 45

a commercial property coverage part component that can be any of several commercial property forms containing an insuring agreement and related provisions.

Question 46

Causes of loss form

Answer 46

a required component of the commercial property coverage part that specifies perils covered

Question 47

Under personal property of others in the BPP, what is the coverage extension included in the policy?

Answer 47

$2,500

Question 48

Under the BPP what are the special limits for the following coverage extensions? Pollutant cleanup and EDP? Increased cost of construction?

Answer 48

$10k/$2,500 per policy year/lower of $10k or 5%

Question 49

What amount of coverage is provided under the BPP special form for property in transit and which causes of loss are covered?

Answer 49

$5k. Has to be in vehicle owned, leased, or operated by the insured and cannot be in the custody of sales personnel. Has to be in coverage territory. Covered for fire, lightning, explosion, windstorm, hail, riot, civil commotion, vandalism, collision with object other than roadbed, and theft.