Chapter 9

Question 1

What is inland marine insurance?

Answer 1

the term inland Marine is used to define a major line of coverage as well as to apply to specific wordings. Inland marine wordings evolved out of ocean marine coverage to continue the insurance of transportation risks once the cargo was on dry land inland marine wordings, which include floaters forms, still mainly apply to risks with some degree of transit exposure

Question 2

what is the most comprehensive commercial policy form, which is used as a foundation of a commercial property insurance program? What categories of risks does it potentially cover?

Answer 2

the most comprehensive commercial policy wording, often used as the foundation of a commercial insurance program, is the commercial property form covering property under the categories of building, equipment, stock, contents, or all property.

Question 3

True or false the commercial property form is available for named perils and all risks?

Answer 3

True

Question 4

True or false commercial property insurance for named perils covers buildings only or building and contents but cannot cover contents only?

Answer 4

False: the form covers buildings, equipment, stock, contents, or all property and insureds choose limits of insurance for each category

Question 5

List several things that can be covered as contents under the commercial property form

Answer 5

Stock including packaging 
Labeling 
Equipment 
Leasehold or tenants improvements 
Property of others 
Generally all contents usual to the business of the named insured

Question 6

Why might named perils be the natural choice, rather than all risks to insure a vacant building, at least while it remains vacant?

Answer 6

A vacant building may be difficult or very costly to ensure under a broad form policy, but the insurer may agree to write the risk on a named perils form on the building until such time as it is no longer vacant.

Question 7

Explain why all risks insurance doesn’t actually mean all inclusive?

Answer 7

All the risks is not the same as all losses. the losses covered are direct physical losses only, and the perils are only insured so long as they are not excluded.

Question 8

List several general categories of exclusions and explain why each is excluded by the insurer

Answer 8

Property exclusions example: money, and other valuable property, automobile, aircraft, watercraft, furs, jewelry and property that is vacant for more then 30 days

Perils excluded: common exclusions are perils of flood, earthquake, sewer backup and overland water, bylaws, inventory storage, pollution, various other environmental hazards, terrorism, and equipment breakdown as well as cyber risks. For some of those perils other insurance may be available to mitigate the effect of this exclusion

Question 9

How is property undergoing “work in progress” treated CPBF?

Answer 9

Lost or damaged any property undergoing some work process it’s excluded. This exclusion is frequently referred to as the work in progress exclusion or the property undergoing process of heat. If a loss results from the work being done to the item insured there is no insurance to the item itself, but any resultant damage to property, other than the piece being worked on is insured.

Question 10

Why do insurers exclude flood and earthquake from CPBF? Do insurers allow for added coverage?

Answer 10

Due to the potential severity of losses arising from these, the standard policy form excludes losses arising from them

Insurers are willing to add coverage for these perils singly or together for additional premium

Question 11

How do deductibles for flood and earthquake compare to property insurance?

Answer 11

Deductibles are much higher then those of property insurance

Question 12

explain why insurers want to cover earthquakes and floods for either all or none of an insurance property, and how some encourage this result.

Answer 12

the insured is usually better advised to insure all locations on the schedule for flood and earthquake coverages, as insurers do not like to select against, they would rather insure all locations for the same perils. Some insurers encourage clients to do this by charging a premium as though all locations are insured for these perils

Question 13

Why do insurers exclude sewer backup and Overland water and some not even allow for separate coverage for these perils?

for insurance who do not offer it as a separate coverage, how do they limit their exposure to risk for these perils?

Answer 13

Depending on the insurance physical location, separate insured may be available from some insurers. In certain areas, insurers will not provide this insurance at all due to the severity of risk. where available, sewer backup and Overland water are defined specifically and are usually subject to a higher deductible and or maybe subject to separate smaller limits of liability.

for commercial risks, insurers usually will not provide Overland water coverage if it is purchased in conjunction with sewer backup coverage

Question 14

List four increases in claim amounts, due to bylaws, that are excluded from CPBF

Answer 14

Increased costs due to a requirement to demolish and rebuild an untamaged portion of a building

Additional costs to rebuild with Superior construction materials

Cost to remove the extra debris

Increase time to build, resulting in an increased business interruption loss

Question 15

How can building bylaws greatly increase the cost of repairs to damage, or partially damaged commercial property?

if an endorsement returns coverage for this type of loss, how can the limits for the endorsement be realistically set, so as to recover actual losses that may occur?

Why would such an endorsement be even more desirable, and even more expensive for older buildings?

Answer 15

Depending on the municipality, they insured may be required to upgrade the entire building to current bylaw standard when as little as 15% of the building has been damaged.also, building bylaws can affect the types of materials used in construction and repair and how the building can be repaired or replaced, which can increase the cost of any such repairer replacement

insurance is available to cover these costs by endorsement to the basic wording. The endorsements are available separately, but they insured should have all four to ensure complete coverage.

Typically this insurance is needed when ensuring older buildings that may not meet current requirements, such as requirements for accessibility by people with disabilities or for earthquake abandonment.

Question 16

Why is inventory storage lost rarely offered as coverage?

if it is, what two things must the insured show to be covered? If the inventory is stolen by employees, how is it treated?

Answer 16

Any insured that has stock or is responsible for stock and transmit has an exposure. However, inventory storage is difficult to bring within the definition of an insured peril to prove a loss, they insured must be able to show that the stock was

• in its care, custody, and control and
• stolen and who stole it. That is, was the loss a crime that is insured on the cpbf wording and thus may be covered if the loss was a Fidelity loss (goods stolen by employees) that require separate insurance

Question 17

How is pollution damage covered, if at all, for commercial property?

Answer 17

insurance for a below ground spill or contamination on the intern zone property is excluded but can generally be added back for a small limit.

Question 18

Give examples of perils from environmental hazards. Why are such perils excluded?

Answer 18

environmental hazards are a group of perils that can lead to losses arising from such causes as the presence of mold, fungus, and other biological or environmental hazards. Generally, losses arising from these perils are uninsurable because they can usually be prevented by maintaining the property

Question 19

What event instigated the exclusion of terrorism as a covered parallel?

Answer 19

following the terrorist attack in New York on September 11th, 2001, property wordings were rewritten to clarify the exclusion of losses arising from this peril.

Question 20

True or false equipment breakdown is excluded from cpbf.

true or false there is no available insurance for equipment breakdown because it is uninsurable

Answer 20

True

False

Question 21

List some cyber risks. How are cyber risks excluded from cpbf?

Answer 21

malicious persons and organizations can attempt to harm the insurance operations with viruses, worms, and ransomware that can hold a company hostage for a ransom payment.

There is no cyber exclusion such in the cpbf, the data exclusion performs the same purpose.

Question 22

How is data problems defined?

Answer 22

A data problem is defined as

Erasure, destruction, corruption, misappropriation, or misinterpretation of data

Air and creating, amending, entering, deleting, or using data

Inability to receive, transmit, or use data

Question 23

List the 5 extensions to the limit of insurance for cpbf

Answer 23

These include insurance for contents at temporary locations, newly acquired buildings, contents at newly acquired locations, property in transit, and property in the custody of sales representatives.

Question 24

For commercial property, who determines the limit of insurance to be carried ? What considerations affect this decision?

Answer 24

The insured determines the limit of insurance to be carried, in conjunction with experts such as a building appraiser or accounts.

Question 25

Explain the relationship among building, equipment, stock, contents, and all property, as they apply to the CPBF

Answer 25

Contents includes equipment and stock and all property is a blanket category that includes building, equipment, and stock

Question 26

List 6 circumstances for which extensions to limits of property insurance may be applied

Answer 26

Insurance for contents at temporary locations
Newly acquired buildings
Contents at newly acquired locations
Property in transit
Property in the custody of sales representatives

Question 27

Why is the temporary locations extension normally offered for no additional premium?

Answer 27

Because it just insures property occasionally off the premises, if it’s regulatory off the premises the insured may have to add another named location to the policy

Question 28

describe the two extensions that apply to newly acquired locations. Explain how and why these extensions are intended to be used.

Answer 28

Buildings at newly acquired locations and contents at newly acquired locations.

This extension is intended to ensure a limited amount of contents at a new location for short period of time.

Question 29

Where / when does the transit extension apply? Explain how the transit extension and unnamed locations extension could be used to cover businesses when they participate in trade shows.

Answer 29

this extension provides insurance for property well in transit to or from the insurance premises well within Canada and the continental United states. It is generally intended to afford temporary or contingent insurance for a limited amount. If the transit exposure represents a major proportion of the risk, separate coverage can be arranged. Insurance with occasional displays at exhibitations or trade affairs may find the combined extensions for transit in the name location sufficient to insure their exposures

Question 30

The sales representative extension has several restriction on its applicability. List them. Why is this extension so restricted?

Answer 30

there may be no coverage for samples left in an unattended vehicle. The wording usually includes a locked vehicle warranty specifying that, for there to be coverage, the contents must be in a fully enclosed compartment, the doors must be locked and windows closed, and there must be visible evidence of forceful entry into the vehicle. this coverage may be useful to an insured who sales people have a limited quantity of samples or literature with them when visiting clients.

Question 31

Give two examples we’re choosing ACV makes more sense than RCV

Answer 31

Some of the property is obsolete and or would not be replaced in the event of a loss

Underwriters may not be willing to offer replacement cost coverage on older buildings or equipment

Question 32

What happens to insurance premiums when RCV is invoked to rebuild the property

Answer 32

well replacement cost covers the client and the benefits of obtaining new property following and insured loss, the limit of insurance is calculated on the value of the item, and the premium is correspondingly higher

Question 33

Why do insurance still have the same site clause if they are okay with removing it at no cost when asked

Answer 33

To avoid a moral hazard. most insurers understand that it’s not feasible for insurance to rebuild on the same side and will agree to remove this requirement on request at no cost

Question 34

True or false do humiliation, and engineering costs associated with removing the damaged building and constructing a new one are covered under RCV?

Answer 34

True

Question 35

Explain the difficulties associated with insuring a historic site?

Answer 35

the limits of insurance must be increased to reflect the increased costs involved in replacing each part of the heritage building with materials and construction methods that best reflect the materials and methods of the original time of construction. The insured can either purchase a policy that will reimburse losses based on the historically accurate construction required by the designation, or be personally responsible for the extra costs of reconstructing the building to these standards

Question 36

Explain the acronyms POED and COED and why are they appealing to companies with many properties in stock that is constantly influx among them

Answer 36

POED - limit and ensuring as all property on the policy declarations page or using a contents of every description

COED -limit and ensuring as contents on the policy declaration page

POED limit combines building and contents and turns together in one limit, this can be adventurous to the client who owns or uses multiple locations and has property regularly moving from one location to another

this avoids the problem of temporary underinsurance at one location as a result of sun influx of stock or equipment.

Question 37

explain how stock reporting basis of coverage can be used to more accurately insure a company whose inventory fluctuates wildly over the course of a year

Answer 37

Two common ways to solve this challenge are ensuring on a stock reporting basis or making use of a peak season endorsement.