CPP - Commercial Package Policy Flashcards
All of the following statements are TRUE regarding an interline endorsement used in a Commercial Package policy (CPP), EXCEPT:
Answer Choices: Select the Correct Answer
It can apply to one or more coverage parts.
It may be a mandatory endorsement.
It may be an optional endorsement.
It can apply to two or more coverage parts.
The correct answer is: It can apply to one or more coverage parts.
EXPLANATION:
Interline endorsements are used in the CPP to simplify coverages and conditions among many different forms and apply only to two or more coverage parts.
Under what circumstances does an insurer allow the transfer of an insured’s rights and duties under a Commercial Package Policy without the permission of the insurer?
Answer Choices: Select the Correct Answer
When the named insured dies.
When the named insured is in the hospital.
When the named insured is out of the United States.
When the named insured is informed of a terminal illness.
When the named insured dies. is correct.
EXPLANATION:
If the named insured dies his or her rights and duties are transferred to the deceased’s legal representative. This occurs automatically, the insurer’s permission is not required.
The “Common Policy Conditions” apply to which coverage parts of a Commercial Package Policy?
Answer Choices: Select the Correct Answer
All coverage parts of the policy.
The property insurance coverages.
The optional insurance coverages.
The liability insurance coverages.
All coverage parts of the policy. is correct.
EXPLANATION:
With a Commercial Package Policy, the common policy conditions apply to all of the coverage parts.
All of the following would be advantages to an insured or an insurer for purchasing or writing a Commercial Package policy, EXCEPT:
Answer Choices: Select the Correct Answer
Packing policies together allows insurers to charge insureds lower premium rates.
Duplicate policy language is eliminated in package policies, making them easier for insureds to understand.
Packaging monoline policies together creates fewer working hours for insurers in servicing policies.
Packaging monoline policies together can provide broader coverage under each coverage part than purchasing the policies separately.
The correct answer is: Packaging monoline policies together can provide broader coverage under each coverage part than purchasing the policies separately.
EXPLANATION:
Packaging monoline policies together does NOT create a policy that provides broader coverage. The coverage parts would provide the exact same coverage whether they are included in a package policy or a monoline policy.
All of the following are listed in the “Common Declarations” of a Commercial Package policy (CPP), EXCEPT:
Answer Choices: Select the Correct Answer
The insured’s premium for each coverage part purchased.
A list of perils insured against.
The name and mailing address of the insured.
The policy period.
A list of perils insured against. is correct.
EXPLANATION:
A list of perils insured against is not included on the common policy Declarations page of a Commercial Package Policy. The policy period, the premium for each coverage part, and the name and mailing address of the insured ARE listed.
All of the following statements regarding a Commercial Package Policy are correct, EXCEPT:
Answer Choices: Select the Correct Answer
Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage.
Almost all commercial risks are eligible for coverage under the Commercial Package Policy.
The insured can choose a variety of eligible commercial coverages to tailor the package to specific business insurance needs.
A complete Commercial Package Policy (CPP) includes a common policy Declarations page, a common policy Conditions sections, and two or more coverage parts.
Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage. is correct.
EXPLANATION:
Ocean Marine and/or Aviation insurance are “specialty” policies that cannot be packaged together with other commercial risks into a package policy.
Billy has his commercial interests covered with a Commercial Package Policy. He would like to modify one of his coverage parts. This change will be made by:
Answer Choices: Select the Correct Answer
Adding an endorsement to the coverage part he would like to change.
Adding an interline endorsement to the policy.
Making a change to the declarations page of the policy.
Making a change to the conditions section of the policy.
Adding an endorsement to the coverage part he would like to change. is correct.
EXPLANATION:
To make a change to one of the coverages in a Commercial Package Policy, a single endorsement would be added to that coverage part.
Which of the following coverage parts would be eligible for inclusion in a Commercial Package policy?
Answer Choices: Select the Correct Answer
Businessowners coverage.
Commercial Crime coverage.
Workers’ compensation coverage.
Directors & Officers (D&O) liability coverage.
Commercial Crime coverage. is correct.
EXPLANATION:
All of the answer choices are excluded from inclusion in a Commercial Package policy except Commercial Crime coverage, which would be eligible.
Drew’s agent is putting together a Commercial Property policy for him. The Declarations page, the Conditions page and several endorsements have been included. Which of the following must still be included to complete the policy?
Answer Choices: Select the Correct Answer
A limit of liability form.
A policy provisions form.
An deductible form.
A cause of loss form.
A cause of loss form. is correct.
EXPLANATION:
A cause of loss form still must be attached. The other answer choices list items that are not “forms” but information that is included on other forms within the policy.
Mr. and Mrs. Smith own a building worth $100,000 and have it insured on the same basis under three separate policies. Carrier A provides $10,000; Carrier B provides $10,000, and Carrier C provides $80,000. If there is a $20,000 fire loss, how will the claim be paid by the policies?
Answer Choices: Select the Correct Answer
Carrier C will pay the entire loss since its limit is higher than the loss.
Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000.
Carrier A will pay $10,000 and Carrier B will pay $10,000.
Each carrier will pay $6,666.66.
Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000. is correct.
EXPLANATION:
Because more than one insurance policy written on the same basis covers the loss, the “Other Insurance” clause will be invoked. Each carrier will pay its “pro rata” share of the loss. Remember from the Insurance Fundamentals chapter that the percentage of coverage that each insurer provides to cover the building is also the percentage of the loss they will pay. Therefore, if Carriers A & B provides $10,000 of coverage, that is 10% of $100,000. This means that Carriers A & B would also cover 10% of the loss. 10% of $20,000 is $2,000.
Which of the following statements is TRUE regarding Commercial Property coverage?
Answer Choices: Select the Correct Answer
Commercial property coverage can only be written as part of a package policy.
Commercial property coverage can only be written as a monoline policy.
Commercial property coverage can be written as both a monoline policy and as part of a package policy.
Commercial property coverage can only be written if a separate liability policy is attached to it.
Commercial property coverage can be written as both a monoline policy and as part of a package policy. is correct.
EXPLANATION:
Commercial property coverage can be written as both a monoline policy and as part of a package policy.
Katrina has her commercial building covered by a commercial package policy. Which of the following is the section within her policy where she would see the dimensions of her building listed?
Answer Choices: Select the Correct Answer
The Common policy Declarations page of the CPP.
The Commercial Property Declarations page.
The CPP conditions section.
The Commercial Property conditions section.
The Commercial Property Declarations page. is correct.
EXPLANATION:
The dimensions of the insured commercial building would be found on the Declarations page of the Commercial Property coverage part.
There are several different Commercial Property coverage forms that can be added to a Commercial Package policy. Which of the following is NOT described on a Commercial Property coverage form?
Answer Choices: Select the Correct Answer
Any property that is excluded from coverage.
A description of the property being covered by the policy.
The number of buildings the insured owns that are not covered by the policy.
Any deductible that applies to the policy.
The number of buildings the insured owns that are not covered by the policy. is correct.
EXPLANATION:
It would not be necessary to include a description of the buildings the insured owns that are not covered under the policy.
The cancellation and non-renewal provisions in property policies are two of the policy provisions that are most frequently subject to statutory amendments by the states. All of the following statements are correct regarding the cancellation and non-renewal provisions in the standardized Commercial Property policy coverage form, EXCEPT:
Answer Choices: Select the Correct Answer
10-days notice of cancellation must be provided to the insured for non-payment of premium.
30-days notice of non-renewal must be provided to the first named insured and any mortgagee.
The standardized Commercial Property forms do not contain cancellation and non-renewal provisions because they are almost always amended by statute.
30-days notice of cancellation must be provided to the first named insured and any mortgagee.
The standardized Commercial Property forms do not contain cancellation and non-renewal provisions because they are almost always amended by statute. is correct.
EXPLANATION:
Remember, the question is asking for the answer that is NOT CORRECT regarding the cancellation and non-renewal provisions of the STANDARDIZED policies. The answer choice: “The standardized Commercial Property forms do not contain cancellation and non-renewal provisions because they are almost always amended by statute.” is NOT CORRECT.
If your state exam tests on your state-specific cancellation and non-renewal provisions, we will cover those in this course. However, you need to know the standardized provisions as well because you might be asked how state statutes change the provisions of the standardized form.
Which of the following Commercial Property conditions is meant to prevent “over indemnification” of the insured?
Answer Choices: Select the Correct Answer
The “Transfer of Rights of Recovery Against Other to Us” condition.
The “Other Insurance” condition.
The “Insurance Under Two or More Coverages” condition.
The “Control of Property “ condition.
The correct answer is: The “Insurance Under Two or More Coverages” condition.
EXPLANATION:
The “Insurance Under Two or More Coverages” condition prevents the insurer from paying more than the total amount of the loss, even if the policy limit has not been met.
The Commercial Property condition known as “Concealment, Misrepresentation, or Fraud” calls for the policy:
Answer Choices: Select the Correct Answer
To pay damages to the insured if the insurance company has intentionally concealed or misrepresented a material fact from the insured concerning what coverage the policy provides.
To be cancelled if the insured intentionally concealed or misrepresented a material fact on the application for insurance.
To be voided if the insured intentionally concealed or misrepresented a material fact on the application for insurance.
To be nonrenewed at the policy expiration if the insured intentionally concealed or misrepresented a material fact regarding the covered property.
To be voided if the insured intentionally concealed or misrepresented a material fact on the application for insurance. is correct.
EXPLANATION:
The Commercial Property condition known as “Concealment, Misrepresentation, or Fraud” calls for the policy to be voided if the insured intentionally concealed or misrepresented a material fact on the application for insurance.
