Chapter 2

Question 1

1-1 According to the BPP’s abandonment condition, who is responsible for making arrangements for the repair or disposal of covered property?

Answer 1

The insured’s responsibility unless the insurer chooses to exercise its option under the loss payment condition.

Question 2

1-2 what does the BPP specify as the insured’s duties in the event of a loss?

Answer 2

Notify the policy if the loss resulted from a violation of the law; give prompt notice (as soon as feasible under circumstances); provide info as to how, when, and where the loss occurred; take all reasonable steps to protect the property from further loss; if the insurer requests, give inventories of damaged and u damaged property and permit inspection of property or records; submit to euo; cooperate with insurer; send signed, sworn proof of loss to the insurer within 60 days after insurer requests.

Question 3

1-3 Describe the insurer’s options in loss payment as established the the BPP.

Answer 3

Pay amount of loss of damage; pay cost of repairing of replacing damaged property; take over all or any part of the property and pay its agreed or appraised value; repair, rebuild, or replace with lkq.

Question 4

1-4 Describe the rights granted to a mortgage holder that is named in the declarations page of a commercial property policy.

Answer 4

Payment for any claim for loss on the covered mortgaged property; notification of cancellation or non renewal.

Question 5

2-1 List the four optional coverages available in the BPP.

Answer 5

Agreed value; inflation guard; replacement cost; extension of replacement cost to personal property of others.

Question 6

2-2 Describe the purpose and operation of the agreed value optional coverage in the BPP.

Answer 6

Remove uncertainty as to whether the amount of insurance carried complies with the coinsurance condition. The option suspends coinsurance condition if the insured carries the amount of insurance the insurer and insured agree to be the property’s full value.

Question 7

2-3 When the insured chooses the replacement cost option under the BPP, how is the coinsurance condition affected?

Answer 7

The amount of insurance required is calculated by multiplying replacement cost by the coinsurance percentage if the claim is made on a replacement cost basis.

Question 8

3-1 contrast material misrepresentation and concealment.

Answer 8

Misrepresentation is an active, deliberate misstatement of fact. Concealment, in contrast, is an intentional failure to disclose a material fact.

Question 9

3-2 Summarize the two parts of the BPPs control of property condition.

Answer 9

1) coverage under the policy will not be affected by acts or omissions of persons other than the insured if those persons are not acting under the direction of control of the insured. 2) violation of a policy condition at one location will not affect coverage at another location.

Question 10

3-3 describe the two requirements an insured must meet before legal action can be brought against an insurer to enforce a Commercial property policy.

Answer 10

1) comply with all conditions; 2) 2 year statute.

Question 11

3-4 Describe the BPP’s liberalization condition.

Answer 11

If an insurer adopts any revision that would broaden coverage and there is no premium charge, the broader coverage is extended automatically to policies already in effect.

Question 12

4-1 describe how a policy may be canceled by an insurer or an insured according to the common policy conditions

Answer 12

Send cancellation to first named insured 10 days for nonpay and 30 for other reasons. Insured can cancel at any time by mailing or delivering written notice of cancellation.

Question 13

4-2 According to the common policy conditions, over what time period is the insurer permitted to examine and audit the insured’s books and records related to the policy?

Answer 13

Any time during policy and for up to 3 years after termination.

Question 14

4-3 According to the common policy conditions, under what circumstances can the insured transfer rights or duties under a policy?

Answer 14

The insured must have the insurer’s written consent. If a named insured dies coverage transfers to the legal representative or person having temporary custody of the property.

Question 15

5-1 Identify examples of tasks for which the BPPs endorsements are useful.

Answer 15

Provide coverage enhancements that some insured’s may want but others don’t think they need or can afford, eliminating coverage for certain exposures, enabling underwriters to accept applications that they would otherwise decline,changing policy provisions to match the specific characteristics of certain industries or insureds, and amending the policy to comply with state insurance regulations.

Question 16

5-2 Under the spoilage coverage endorsement, what must cause the spoilage of perishable stock in order for the spoilage to be covered?

Answer 16

Power outage or an on-premises breakdown of contamination of the insured’s refrigeration, cooling, or humidity control equipment.

Question 17

5-3 Identify the two sources of flood insurance for buildings and their contents.

Answer 17

NFIP and private insurers without federal participation.

Question 18

5-4 Contrast the ISO earthquake and volcanic eruption endorsements.

Answer 18

Earthquake has a coinsurance requirement and is written to for the full policy limit. Volcanic eruption is covered with a sublimit lower than the regular policy limit and has no coinsurance requirement.

Question 19

5-5 Explain how the Peak Season Limit of Insurance endorsement covers the fluctuating values of business personal property.

Answer 19

Provides different amounts of insurance for certain time frames during the policy period.

Question 20

5-6 Explain how the value reporting form covers the fluctuating values of business personal property.

Answer 20

Provides insurance for the maximum expected values and requires the insured to periodically report property values to the insurer. The final premium is based on the reported values.

Question 21

5-7 Explain why many insurers would decline to issue a value reporting form to a smaller insured.

Answer 21

The premium may not be large enough to warrant the added expense of processing the reports and calculating the final premium.

Question 22

6-1 Define rating

Answer 22

Process of applying a rate to a particular exposure and performing any other necessary calculations to determine an appropriate policy premium.

Question 23

6-2 What s class rating?

Answer 23

Uses rates reflecting the average probability of loss for businesses within a large group of similar risks.

Question 24

6-3 How is specific rating different from class rating?

Answer 24

Develops rates that reflect the exposure to loss of a particular business.

Question 25

6-4 Explain why the limit of insurance applicable to the coverage is an important component of the final premium.

Answer 25

It represents the exposure against which the applicable rate is multiplied to calculate the premium.

Question 26

6-5 identify the components of the rate for Cause of loss – Basic Form.

Answer 26

Group I rate (fire, lightning, explosion, vandalism, and sprinkler leakage) and Group II rate (all other causes of loss)

Question 27

6-6 identify the coinsurance-related assumption under which the rates ordinarily used for insuring buildings and personal property are calculated.

Answer 27

80%

Question 28

6-7 identify the deductible-related assumption under which the rates ordinarily used for insuring buildings and personal property are calculated.

Answer 28

$500 deductible.

Question 29

The inspections and surveys condition, a common policy condition attached to the ISO Commercial Package Policy, makes it clear that the insurer has the right to inspect the insured premises and may ____ ______.

Answer 29

recommend changes