Chapter 7: Commercial Property Insurance

Question 1

Commercial Property is…

Answer 1

property for business use while on premises (3 types: building, stock, equipment)

Question 2

Broad Form covers…

Answer 2

1. vehicle impact caused by insureds or employees
2. all sources of smoke damage (excluding industrial operations and agricultural smudging)
3. water damage due to freezing or rupturing except: flooding, overflow, seepage or sewer backup
4. theft: including damage by theft or attempted theft
5. collapse of building: except due to earthquake, faulty or improper materials/workmanship/design

Question 3

Factors that affect fire rate

Answer 3

1. building construction: concrete is cheaper to insure than wood frame
2. protection:
   - public protection: from outside sources (ie. distance to fire hydrant, fire hall, accessibility)
   - private protection: get a discount if you have sprinklers or alarms
3. occupancy: type of business done by insured and others in the building
4. location: area, distance from other buildings and their characteristics
5. claims history: review type of business and history of applicant (usually 5 years)

Question 4

The building described on the declarations page includes…

Answer 4

1. fixed structures (ie. metal fence, sign, bike stands)
2. additions and extensions (ie. walkways, canopies)
3. permanent fixtures (ie. A/C units, carpet, light fixtures, bathroom fixtures)
4. materials & equipment on premises: for maintenance and normal repairs
5. growing plants: if inside the building and for decoration only

Question 5

Stock includes…

Answer 5

stock = merchandise usual to the business

1. packaging & advertising materials (ie. catalogues, boxes, grocery bags)
2. similar property of others: in the care of insured where insured is legally liable or required to insure by contract

Question 6

Equipment includes…

Answer 6

all contents usual to the business + similar property of others + tenant improvements

Question 7

What is Co-insurance Clause

Answer 7

When insureds purchase less insurance than specified by the insurer

must purchase a minimum limit of insurance based on percentage

applies to partial losses only

Question 8

Calculation of the amount of settlement for a partial loss

Answer 8

Settlement = (Did/Should) x Loss amount

did= amount of insurance purchased
should= percentage of insurance required (usually 80% of ACV) x ACV

Question 9

What is Debris Removal

Answer 9

allows insureds to use remainder of limit to pay for removal of debris

Question 10

Summarize the provisions of the Reinstatement clause

Answer 10

loss under any items of this form shall not reduce the applicable amount of insurance

limits of insurance remain unchanged for the entire policy period, regardless of the number/amounts of claims paid

Question 11

While the “Subrogation Clause” recognizes the right of the insurer to collect the amount of any loss paid by it from the party responsible for the loss, the insurer agrees not to exercise that right in all cases. Explain.

Answer 11

will not subrogate fellow insured(s) or those held harmless by contract (ie. payees, business partners and subsidiary firms)

if the net amount recovered (after costs) is not enough to fully cover the loss, amount is divided between the insurer & insured based on percentage of loss borne

Question 12

3 obligations placed upon insureds by the “Property Protection Systems” clause

Answer 12

must notify insurer immediately…

1. any known interruption/defect of protection system
2. any cancellation of monitoring/maintenance services
3. notification of suspension of police services

Question 13

Locked Vehicle Warranty

Answer 13

fully enclosed body/compartment, locked doors/windows and visible signs of forceful entry

Question 14

Glass insurance

Answer 14

covers accidental damage by anyone, earth movement or thieves

excludes: fire, war, nuclear hazard

Question 15

What evidence are required for a claim to be successful under Burglary insurance

Answer 15

1. unlawfully taken from within the premises
2. unlawfully entered or exited
3. visible signs of the use of force
4. force used to gain access into the safe or remove from premises

Question 16

What evidence are required for a claim to be successful under Robbery insurance

Answer 16

1. taken by actual or threatened force
2. taken from a custodian killed or rendered unconscious
3. custodian witnessed property being taken

Question 17

What evidence are required to for a claim to be successful under Theft insurance

Answer 17

show that property was taken without owners consent

Question 18

2 key coverages provided by a Boiler and Machinery policy

Answer 18

1. damage to buildings from explosion of boilers & pressure vessels operating > 15 PSI
2. electrical or mechanical breakdown

Question 19

3 different types of property items insured by the Builders Risk - Broad Form (Contractor’s Insurance)

Answer 19

1. materials forming part of the finished part
2. landscaping & temporary buildings (ie. scaffolding, trailers, forms)
3. coverage can be added for materials in transit or at any other location

Question 20

4 characteristics common to Business Interruption policies

Answer 20

1. a contract of indemnity
2. insures same perils as property policy
3. coverage not limited to policy period
4. pay expenses when they reduce amount of loss

Question 21

What is Business Interruption Insurance

Answer 21

restores lost income if caused by insured perils up to the level the business would have earned if the loss hadn’t occurred (insured perils = same as property insurance)

Question 22

Types of Business Interruption Insurance and state the basic difference

Answer 22

1. earnings form: coverage ceases when property is rebuilt/repaired/replaced
2. profits form: coverage ceases when income restored to expected level

Question 23

State the purpose of Extra Expense insurance and provide 3 examples of extra costs insured by this policy

Answer 23

pay extra expenses needed to maintain normal business

examples: rent temporary premises, rent temporary equipment, pay overtime salaries

Question 24

Building, Stock, or Equipment:

Mops, laundry detergent when insured is owner of the building and no other coverages have been purchased

Answer 24

Building

Question 25

Building, Stock, or Equipment:

Wrapping paper, tape and packing materials

Answer 25

Stock

Question 26

Building, Stock, or Equipment:

Photocopier and furnishings leased from office supply company

Answer 26

Equipment

Question 27

Building, Stock, or Equipment:

Bathroom sinks, air conditioning system and wall to wall carpeting

Answer 27

Building

Question 28

Building, Stock, or Equipment:

Growing plants contained in building owned by insured and held for re-sale

Answer 28

Building

Question 29

Building, Stock, or Equipment:

Additions and improvements made to rented premises by tenant

Answer 29

Equipment

Question 30

A form of crime coverage requiring visible signs of forcible entry or exit from premises

Answer 30

Burglary

Question 31

Provides coverage for special classes of property when the loss results from actual destruction, disappearance or wrongful abstraction

Answer 31

Money and Securities (Broad Form) Policy

Question 32

Insures property while in transit, at the job site awaiting installation, during and after installation until such time job is accepted by purchaser

Answer 32

Installation Floater

Question 33

Designed to cover the cost of reproducing lost or damaged documents

Answer 33

Valuable Papers and Records Insurance

Question 34

Coverage commences at time of the loss and continues until the property is rebuilt, repaired or replaced

Answer 34

Earnings Form

Question 35

The taking of property by inflicting violence upon the custodian, or putting such custodian in fear of violence

Answer 35

Robbery

Question 36

Insures owned, rented or leased mobile equipment, including miscellaneous tools

Answer 36

Contractor’s Equipment Floater

Question 37

Coverage commences at the time of the loss and ceases when the income is restored to the level it would have been had the loss not occurred

Answer 37

Profits Form

Question 38

Broadest form of crime coverage insuring against the taking of property without the owner’s consent

Answer 38

Theft

Question 39

Includes coverage for actual removal of receptacle from premises

Answer 39

Safe Burglary Policy