chapter eight - commercial property insurance Flashcards
The Common Policy Conditions in commercial property insurance include all of the following, except:
Fire Department Service Charge
Transfer of Rights and Duties
Inspections and Surveys
Changes
Fire Department Service Charge
(The other policy conditions are Cancellation, Examination of Books and Records, and Premiums. The Fire Department Service Charge is automatically included as Additional Coverage.)
Which of the following is excluded under the Basic Causes of Loss form?
Volcanic action
Utility services
Sprinkler leakage
Sinkhole collapse
Utility Services.
Utility services are not covered under the basic cause of loss form
Which of the following perils is not one of the three included on the Broad Causes of Loss Form?
Steam boiler explosion
Water damage from accidental discharge
Falling objects
Weight of ice, snow or sleet
Steam boiler explosion
Steam boiler explosion is not covered under the broad cause of loss form
How much can be paid under the Business and Personal Property Coverage Form for debris removal due to a covered loss?
25% of the loss
$5,000
15% of Coverage A
$1,000
25% of the loss
25% of the coverage applies to direct loss
What is the limit of coverage for business personal property away from the premises under the Business and Personal Property coverage form?
$10,000
$1,000
$5,000
$15,000
$10,000
A building is considered vacant unless what percentage of the building’s total square footage is rented or used to conduct customary operations?
10%
26%
20%
31%
31%
The Builder’s Risk Coverage form automatically ends at the earliest of all of the following, except:
60 days after construction is complete
Policy expires
Property is abandoned
Property is sold
60 days after construction is complete.
The coverage automatically ends 90 days after construction is complete
The Condominium Association Coverage Form is used in place of which coverage form when insuring a condo building insured by the association?
Homeowner Policy
Condominium HO–6 policy
Dwelling property
Building and Personal Property Coverage form
Building and Personal Property Coverage Form
(Coverage includes the buildings and the fixtures that are a part of the building, such as refrigerators, air conditioners, and other appliances, if the Association Agreement requires the association insure the property.)
The Condominium Commercial Unit-Owners Coverage covers each of the following, except:
Improvements
Appliances
Personal property
Fixtures
Personal Property
(The unit-owners’ appliances cannot be owned by the insured to qualify for coverage, but the business personal property of the insured is covered.)
In the Business Income Coverage Form, Period of Restoration begins _______ after the time of loss.
72 hours
86 years
100 months
55 days
72 hours
(The Period of Restoration begins 72 hours after the time of loss, and ends on the earlier of the date when the property should be repaired or rebuilt with reasonable speed, or the date when business is resumed at a new permanent location.)
Each of the following is covered under the Legal Liability Coverage Form; except:
Loss of income
Defense costs
Damage to real or personal property owned by others when it is in the insured’s care
Loss of use
Loss of income.
Loss of income is not covered by this coverage form
The Ordinance or Law Coverage endorsement covers each of the following losses, except:
Demolition of the undamaged parts of a building
Increased cost of repairing damaged parts of the building
Clearance of the undamaged parts of a building
Loss of value in the damaged portion of the building
Loss of value in the damaged potion of the building
(This endorsement provides coverage if the enforcement of any building, zoning, or land use law results in the loss of value of the undamaged portion of the building)
What Endorsement …
The insured’s business is located near a fault line, so the insured wanted to add coverage in case an earthquake occurs.
Earthquake and Volcanic Eruption Endorsement
What Coverage …
The insured is concerned that zoning laws will lead to increased costs to repair the building if it were to be damaged.
Ordinance or Law Coverage
What Insurance …
The insured’s store sees more traffic around Christmas, and the insured wants higher coverage during the last couple months of the year.
Peak Season Limit of Insurance.
A restaurant owner wants coverage in case the refrigeration units break down.
Spoilage.
The insured’s business has stock that fluctuates in value, and the insured wants to make sure the policy covers the values actually at risk.
Value Reporting Form (Full Value Form)
An office building is going to be unoccupied for an extended period of time, and the insured does not want the unoccupancy to lead to gaps in coverage.
Vacancy Permit.
All of the following are Causes of Loss forms under the Commercial Property Coverage Part, except:
The Basic Form
The Special Form
The Broad Form
The Standard Form
The Standard Form.
There are three causes of Loss forms: The Basic Form, the Broad Form, and the Special Form
Which of the following would NOT be found in the Common Policy Declarations page of a Commercial Package Policy?
The expiration date
The named insured
The mortgagee
The occurence form
The occurence form
(The Declarations Page shows the Who, What, When, Where, and How Much regarding the insurance provided by the policy. An occurrence form is a separate form used for claim-filing.)
Which of the following statements about the CPP is incorrect?
The insured’s rights and duties may be transferred to another party without insurer approval
The insurer may examine the insured’s books and records at any time during the policy period
The first named insured may cancel the policy by mailing advance written notice of the cancellation
The first named insured is responsible for the payment of all premiums
The insured’s right and duties may be transferred to another party without insurer approval.
(The insured’s right and duties cannot be transferred without the written consent of the insurer.)
The Extra Expense Coverage Form covers:
Expense of removing the debris of a covered direct loss
Expense of disposing of spoiled merchandise caused by a power outage
Necessary expenses incurred during the period of restoration
Loss of business income during the period of restoration
Necessary expenses incurred during the period of restoration.
(The principal function of the Extra Expense Coverage Form is to reimburse the insured for expenses incurred in getting back into business as soon as possible after a loss.)
Under a Building and Personal Property Coverage Form, up to what percent of a partial loss would be available for debris removal?
15%
5%
25%
10%
25%
(The policy will pay up to a maximum of 25% of the coverage applying to the loss. In the event of a total loss, the policy will pay up to an additional $10,000 for debris removal)
The Replacement Cost optional coverage of the Building and Personal Property Coverage Form applies automatically to all of the following types of property, except:
The building listed in the Declarations
Merchandise held in storage or for sale
The insured’s business personal property
Personal property of others
Personal Property of Others
Property of others is not included in the replacement cost optional coverage
Which statement is false about Commercial Property insurance?
Time element losses and direct losses are the same
Loss of commissions due to interruptions of a manufacturing business is a time element loss
The Builder’s Risk Reporting Form insures a building under construction for an amount that increases with the increasing value of the building
The Condominium Association Form will cover refrigerators, air conditioners and cooking ranges that are owned by the named insured
Time element losses and direct losses are the same.
Time element losses are indirect losses, not direct
Which of the following property is not covered under the Building and Personal Property Coverage Form?
Merchandise held in storage
Telephone system
Electronic data
Furniture
Electronic Data.
(Electronic data, including information, facts, and computer programs and the cost to replace or restore the electronic information is not covered.)
Which of the following statements regarding Commercial Property insurance is false?
Time element losses and direct losses are the same
The policy limit of the Builder’s Risk Reporting Form increases at intervals to correspond with the value of the building
The Condominium Association Form will cover refrigerators, air conditioners and cooking ranges that are owned by the named insured if the Agreement requires it
The Building and Personal Property form includes an 80% coinsurance provision
Time element losses and direct losses are the same.
How long after a loss before the Period of Restoration begins for Business Income coverage?
72 hours
168 hours
48 hours
24 hours
72 hours.
The Period of Restoration begins 72 hours after the time of the loss
Under the Commercial Building and Personal Property Coverage Form, the building is considered vacant, unless at least what percentage of the square footage is rented or is used to conduct operations?
61%
51%
41%
31%
31%
(A completed building is considered vacant unless at least 31% or more of the total square footage is rented or is used to conduct operations)
Which of the following is correct about Inspections and Surveys under the Common Policy Conditions of the CPP?
The insurer may make inspections and surveys only during the first 90 days of the policy period
The insurer has the right, but is not obligated, to make inspections and surveys at any time
Inspections or surveys must be made prior to the policy effective date
The insurer has the obligation to make inspections and inform the insured if the property has serious hazards
The insurer has the right, but is not obligated, to make inspections and surveys at any time.
(Inspections and surveys are a reasonable and effective underwriting tool of the insurer. They may be made whenever the insurer believes it to be necessary)
All of the following are true of the Building and Personal Property Coverage Form, except:
Personal property owned and used to service the building is included in the building coverage
Personal property of others that is in the insured’s care, custody, and control is automatically included up to $2,500
Building Coverage includes the building structure, completed additions, permanently installed fixtures, machinery and equipment
Tenant’s improvements that are not legally removable are included in the Personal Property of Others Coverage
Tenant’s improvement that are not legally removable are included in the Personal Property of Others Coverage
(Tenants Improvement and Betterments are covered under Business Personal Property, not Personal Property of Others Coverage)
Which statement is false regarding the Building Personal Property Coverage Form?
Preservation of Property Coverage provides named-perils coverage for 10 days
The optional inflation guard coverage automatically increases the face amount of the policy
There is no coverage for automobiles that are held for sale
The optional agreed value coverage negates the coinsurance clause
Preservation of Property Coverage provides named-perils coverage for 10 days.
(Preservation of Property is provided on an open perils basis for a maximum for 30 days)
The Commercial Property policy applies a limit of what dollar amount for business personal property temporarily away from the premises?
A $5,000 B $10,000 C $15,000 D $2,500
$10,000.
(A limit of $10,000 of coverage is extended for the insured’s covered property (other than stock) while it is temporarily at a location the insured does not own, lease, or operate)
Under the Commercial Property policy’s Basic Cause of Loss Form, how long is vacancy allowed before coverage against the peril of vandalism is suspended?
90 days
120 days
60 days
30 days
60 days.
All of the following are true of Builders Risk forms, except:
Coverage does not apply to outside radio and television antennas
Coverage is always written on an open perils basis
Coverage terminates when the policy expires or it is cancelled
There is no vacancy provision
Coverage is always written on an open perils basis.
Coverage may be written with any of the Cause of Loss Forms (Basic, Broad, or Special
ABC industries has insured a factory building for $80,000. The replacement value is $150,000. If the commercial property policy insuring the building has an 80% coinsurance clause, how much will ABC’s insurer pay for a $12,000 covered loss?
$9,600
$10,000
$8,000
$12,000
$8,000.
(The coinsurance clause requires insurance at 80% of the replacement value, or $120,000. Because the policy limit of insurance is only $80,000, or 2/3 of $120,000, the claim payment would be 2/3 of $12,000 or $8,000.
Which of the following is true regarding the Earthquake Cause of Loss Form?
It can be used by itself to provide a stand alone Earthquake policy
It provides coverage for mudslides
It includes coverage for earthquakes that start within 168 hours after the expiration of the policy
It can be used only with another Causes of Loss Form
It can be used only with another Causes of Loss Form.
All of the following are common policy conditions under the CPP, except:
Interline endorsement
Changes
Examinations of books and records
Cancellations
Interline endorsement.
(Interline endorsements coordinate coverage contained in one part of the policy with other coverage parts to prevent duplication and are not considered a policy condition)
The Condominium Commercial Unit-Owners Coverage Form does not cover which of the following?
Building exterior wall
Business personal property
Improvements
Appliances
Building exterior wall.
The exterior wall is part of the common property covered by the Condominium Association Coverage Form
The Basic Cause of Loss form covers damage caused by bacteria during what period of time following policy inception?
12 months
6 months
24 months
18 months
12 months.
A commercial property has a $400,000 Commercial Building and Personal Property policy, and a fire breaks out on the loading dock, causing $80,000 in damage and $20,000 in debris removal. What is the maximum that may be received for the damage?
$100,000
$400,000
$80,000
$90,000
$100,000
(The $80,000 loss plus the entire $20,000 debris removal will pay, since that amount is less than the 25% of coverage limit)
Which of the following is found in the Common Policy Declarations of the CPP?
The provision granting the insurer the right to make inspections of insured property
The provision that the first named insured is responsible for all premiums
The deductible
The insurer’s cancellation right
The deductible.
(The deductible amount is shown on the Common Policy Declarations page. The other statements appear in the Common Policy Conditions)
Under the Common Policy Conditions of the CPP, which of the following is true regarding inspections and surveys?
Inspections or surveys must be made prior to the policy effective date
The insurer may conduct inspections and surveys only during the first 90 days of the policy period
The insurer has the obligation to conduct inspections and inform the insured if the property has serious hazards
The insurer has the right, but is not obligated, to conduct inspections and surveys at any time
The insurer has the right, but is not obligated, to conduct inspections and surveys at any time.
Which of the following is true regarding Property Off Premises coverage under the Building and Personal Property Coverage Form?
Property in a motor vehicle or in the care, custody, and control of a salesperson is included
It is offered as an Additional Coverage
Property Off Premises is covered only for 30 days after its removal from the premises
There is a coverage limit of $5,000 on Property Off Premises
Property in a motor vehicle or in the care, custody, and control of a salesperson is included.
Which of the following is true regarding the Broad Form under the Commercial Property policy?
The water damage coverage includes sewer backup
After 60 days of vacancy, coverage for glass breakage is suspended
It provides limited coverage for fungus, wet or dry rot, and bacteria up to $25,000
Water damage coverage includes repair of broken or ruptured plumbing
After 60 days of vacancy, coverage for glass breakage is suspended.
(If, at the time of loss, the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss, there is no coverage for loss resulting from the following six perils: vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft, glass breakage, or water damage.)
When considering insurability of a commercial property for renewal, the insurer can use:
Physical inspection
Price of company stock
Police records
Lie detector test
Physical inspection.
Which of the following is false regarding the Building and Personal Property Coverage Form?
Newly acquired or constructed property is automatically included for 30 days, not exceeding $250,000 for each building
Business personal property includes property that is either in the building or within 100 feet of the building
The policy covers vehicles licensed for road use
Trees, shrubs and plants are covered up to $1,000 with a sublimit of $250 for any one tree, shrub or plant
The policy covers vehicles licensed for road use.
Autos for sale and those licensed for road use are excluded
Choose the false statement regarding the Value Reporting Form.
Reports may be filed either daily, weekly, monthly, or quarterly
Late reporting or under-reporting will result in a penalty in the event of a loss
The insured pays an advance premium at the beginning of the policy period
The insured is only required to report up to 80% of value of the property
The insured is only required to report up to 80% of value of the property.
(Reporting of 100% of values is required to guarantee that adequate insurance is being provided and charged.)
Which of the following is not covered under the Building and Personal Property Coverage Form?
Accounts, bills, currency, deeds, evidence of debt, money or securities
Building materials that are on or within 100 feet of the described premises
Completed additions
Personal property owned and used to service and maintain the building
Accounts, bills, currency, deeds, evidence of debt, money or securities.
(these are all excluded under this form)
Which Cause of Loss form for the Commercial Property Coverage Part will cover loss of sales merchandise due to a burglary?
The Special Form
The Broad Form and The Special Form
There is no burglary coverage provided by the Commercial Property Policy
The Broad Form
The Special Form.
the perils of Burglary and Theft are not excluded under the Special Form
Which of the following is correct regarding preservation of property under the Building and Personal Property Coverage Form?
The policy provides off-premises coverage whenever property is temporarily away from the premises
Preservation of property coverage is provided against the same perils listed in the policy’s causes of loss form
The policy provides open perils coverage for 30 days on insured property that is being moved or temporarily stored at another location because of the endangerment of a covered peril
The policy stipulates how insured property is to be protected when endangered by a named peril
The policy provides open perils coverage for 30 days on insured property that is being moved or temporarily stores at another location because of the endangerment of a covered peril.
Choose the property that is not settled on a replacement cost basis under the Building and Personal Property Coverage Form.
Stock held for sale that is shown on the Declarations
Personal property of others
The insured’s business personal property
The building listed in the Declarations
Personal Property of Others
Property of others is valued on an Actual Cash Value basis, unless otherwise specified
Which of the following losses would the Building and Personal Property Coverage Form NOT pay on an actual cash value basis?
A loss to awnings and floor coverings
A loss to outdoor equipment or furniture
A loss to appliances, whether attached or not
A loss of $2,500 or less to a building
A loss of $2,500 or less to a building.
(A loss to the building of $2,500 or less would be paid at replacement cost, all others mentioned are paid at actual cash value)
Under the Commercial Property policy, debris removal and fire department service charge coverage are examples of:
Endorsements
Exclusions
Additional Coverages
Optional coverages
Additional Coverages.
Under the Building and Personal Property Coverage Form, when is abandonment allowed?
Abandonment is allowed whenever the insured and insurer fail to reach agreement on the amount of a loss
Abandonment is never allowed
Abandonment is allowed only after written notice to the company
Abandonment is allowed only in the cases of total loss
Abandonment is never allowed.
Which of the following is true regarding the Broad Form under the Commercial Property policy?
The water damage coverage includes sewer backup
Water damage coverage includes repair of broken or ruptured plumbing
It provides limited coverage for fungus, wet or dry rot, and bacteria up to $25,000
After 60 days of vacancy, coverage for glass breakage is suspended
After 60 days of vacancy, coverage for glass breakage is suspended.
Which endorsement is the best choice to cover a store’s holiday inventory?
peak season
excess inventory
fluctuating inventory
brands and labels
Peak Season.
Which of the following property may be covered under a Building and Personal Property Coverage Form?
Personal property while waterborne
Vehicles licensed for road use
Personal property that is covered elsewhere
Grain stored inside a building
Grain stored inside a buidling.
Hay and grain are covered inside a building, but not outside.
A building valued at $200,000 is insured for $150,000 with an 80% coinsurance requirement and a $1,000 deductible. After the building is totally destroyed, incurring debris removal expenses of $10,000, how much will the Building and Personal Property Coverage Form pay?
$155,000
$159,000
$154,000
$160,000
$159,000.
(After a total loss, the policy will pay the face amount less the deductible, plus up to $10,000 for debris removal. The coinsurance requirement only penalizes the insured for not carrying insurance to value in the case of a partial loss.)
Which of the following is not included in the Personal Effects and Property of Others Extension under the Building and Personal Property Coverage Form?
Personal effects owned by the insured
Loss by theft of personal effects
Personal effects owned by any partner or member of the insured
Personal property of others in the insured’s care
Loss by theft of personal effects.
(Personal effects of the insured, and of others that is in the insured’s care, custody, or control, are covered up to $2,500. Coverage does not include loss by theft.)
Which coverage form may not be added to the Commercial Property Coverage Part?
Building and Personal Property Coverage Form
Homeowners Special Form
Commercial Builders Risk Coverage Form
Legal Liability Coverage Form
Homeowners Special Form
The CPP is designed for Commercial insureds only. Personal lines policies are not eligible for inclusion.
All of the following are covered under the Building and Personal Property Coverage Form, except:
Building materials that are on or within 100 feet of the described premises
Personal Property owned and used to service and maintain the building
Accounts, bills, currency, deeds, evidence of debt, money or securities
Completed additions
Accounts, bills, currency, deeds, evidence of debt, money or securities.
The Outdoor Property coverage extension under the Building and Personal Coverage Form insures against which of the following perils?
Explosion, riot, and civil commotion
Windstorm, hail, explosion, and vehicles
Riot, civil commotion, and vandalism
Windstorm, hail, riot, and civil commotion
Explosion, riot, and civil commotion
Windstorm, vehicles and vandalism are not covered perils under this coverage extension.
Which of the following conditions under a Building and Personal Property Coverage Form determines how losses will be paid?
Deductible
Valuation Clause
Appraisal
Loss Conditions
Valuation Clause
(The Valuation Clause sets forth the method of evaluating losses, and treats valuation of unusual property such as stock that has been sold, glass, outdoor equipment, and valuable papers.)
Which of the following conditions under a Building and Personal Property Coverage Form determines how losses will be paid?
Deductible
Valuation Clause
Appraisal
Loss Conditions
Valuation Clause
(The Valuation Clause sets forth the method of evaluating losses, and treats valuation of unusual property such as stock that has been sold, glass, outdoor equipment, and valuable papers.)
Which of the following is true regarding Property Off Premises coverage under the Building and Personal Property Coverage Form?
Property Off Premises is covered only for 30 days after its removal from the premises
It is offered as an Additional Coverage
There is a coverage limit of $5,000 on Property Off Premises
Property in a motor vehicle or in the care, custody, and control of a salesperson is included
Property in a motor vehicle or in the care, custody, and control of a salesperson is included.
(The coverage extension for property off premises provides up to $10,000 of coverage for the insured’s covered property (other than stock) while it is temporarily at a location the insured does not own, lease, or operate. This includes property located at a fair, trade show, or exhibition; in or on a vehicle; or in the care, custody, or control of the named insured’s salesperson.)
