Ins Exam G - Commercial Property Flashcards
COMMERCIAL PACKAGE POLICY (CPP) OVERVIEW **
> a comm pkg policy consists of
- Common policy Dec & Conditions
- 2> coverage parts (if one cvrg needed, monoline policy is applied for)
Business selects cvrgs needed or desired
NO MANDATORY CVRGS (VARIES BY STATE) - PQ
CPP CVRG OVERVIEW **
a CPP can incl almost any comm cvrg the insured might need (w/ exception of Ocean Marine, W/C, & Aviation ins), Incl:
- Comm Prop - Comm GL - Comm Inland Marine
- Boiler & Machinery - Comm Crime - Prof Liab
COMMON DECLARATIONS **
applies to entire policy whereas each indiv crvg has own DEC PAGE (5 Ps):
- Person/ Property
- Policy #
- Policy Term
- Policy Limit
- Premium - by coverage
COMMON CONDITIONS **
apply to all cvrg forms:
- Cancellation Condition - sets forth the circumstances under which policy may be Cancelled
- Insurer Cancellation: - Non-Renewal: 60 Days
- Non-Payment of Premium: 10 Days
- Other Reasons: 30 Days
- Rate Increase >25%: 60 Days
- Insurer Cancellation: - Non-Renewal: 60 Days
CPP ENDORSEMENTS **
> Mandatory - Cancellation Changes
- Used if any prop cvrg is added for a building
INTERLINE ENDORSEMENTS
- may be used w/ more than one line of ins and thus apply to more than one part of a multi-line policy
Commercial Property Basic Form: CP1 *
Coverages: - Fire
- Lightning
- WCSHAVVER
- Vandalism
- Sprinkler Leakage
- Sinkhole Collapse
Commercial Property Broad Form: CP2 *
- CP1 Coverages
- Weight of Ice, Snow, Sleet
- Accidental discharge or overflow of water or steam
- Continuous seepage and freezing excluded
- Falling Objects
- Limited Mold
- Collapse, if caused by certain Perils
Commercial Property Special Form: CP3 *
- Insured against ALL PERILS not specifically excluded
- Open Perils
BUILDING and PERSONAL PROPERTY FORM: BUSINESS PERSONAL PROPERTY
Covered when located in or on the building or in the OPEN W/IN 100FT OF THE BUSINESS PREMISES
- furniture, stock, and other personal property
- additional locations added by endt
- personal property of others in the care, custody, or control of the insured located in or on the building or in the open w/in 100ft of the described premises
BUILDING and PERSONAL PROPERTY FORM: EXTENSION of COVERAGE
if the insurance amount purchased is equal to or higher than THE COINSURANCE PERCENTAGE OF 80% OR MORE as shown in the Dec, the following cvrg extensions are incl in the policy:
- Newly Acquired Building or Building Under Construction
- $250k max ea builder
- must maintain 80%> coinsurance
- Business Property @ Newly Acquired Building
- $100k max
- Expiration - extensions expire the earlier of
- the end of the policy period
- 30 Days after u acquire the property or begin construction
BUILDING and PERSONAL PROPERTY FORM: OTHER CONDITIONS
- VACANCY PROVISION - if building vacant more than 60 consecutive days before the damage or loss, there is no cvrg for vandalism, glass breakage, water damage, theft, or sprinkler leakage
- Loss Valuation - depends on the form used.
> Coverage Options - Replacement Cost, inflation guard, and stated value covrg avail by endt
> Additional cvrgs incl: - debris removal: $10k
- Fire Dept Svc Charge: $1k
> Trees, Shrubs, and Plants - $250 per item- was $500 on Personal Property
BUSINESS INTERRUPTION
the interruption of operations must result from a direct loss to property by a covered Peril
- requires one cause of loss from which identifies the covered Peril
- CVRG FOR NET INCOME (profit or loss before taxes) that would have been earned before loss
- cvrg for continuing operating expenses (payroll and utilities)
- covers rental value - loss of lease values
CONTINGENT BUSINESS INCOME
- CONTRIBUTING LOCATIONS
- RECIPIENT LOCATIONS
this cvrg is written to protect certain types of businesses from financial loss sustained when a non-owned property has a loss and it affects the insured’s business profits or expenses. ex: biz cannot get supplies to make product
> CONTRIBUTING LOCATIONS - needed when the insured business depends on a business at another location that cannot continue to supply material or services for the insured
> RECIPIENT LOCATIONS - needed when an insured business depends on a business at another location to receive its products or services
CONTINGENT BUSINESS INCOME
- MANUFACTURING LOCATIONS
- LEADER LOCATIONS
> Manufacturing Locations - needed when an insured business has a sales contract w/ the manufacturer of products who can no longer deliver those products to the insured’s customers
Leader Locations - insured can no longer depend on a business at another location (eg: next door) to attract business to the insured’s location.
Business Income Coinsurance Clause Alternatives
- Agreed Amount Endt *
These options are available on the commercial property policy as an alternative to a standard coinsurance requirement
> Agreed Amount Endt
- substitutes a $ amount for the coinsurance %
- in effect, this waives the coinsurance requirement replacing it w/ an agreed amount. EX: if the insured purchased business income at the agreed amount, there will not be a penalty if the insured’s gross earnings have increased above the agreed amount
BUSINESS INCOME COINSURANCE CLAUSE ALTERNATIVES
- MAXIMUM PERIOD of INDEMNITY
MAXIMUM PERIOD of INDEMNITY
- this coverage pays the insured for loss of business income
- amount paid is the lesser of the limit on the Dec of the amount of loss sustained during 120 DAYS FOLLOWING THE LOSS
BUSINESS INCOME COINSURANCE CLAUSE ALTERNATIVES
- MONTHLY LIMIT of INDEMNITY
MONTHLY LIMIT of INDEMNITY
- insured will rcv only the loss of business income in EACH PERIOD 30 CONSECUTIVE DAYS following a loss multiplied by the percentage selected on the Dec
- choices are 1/3, - 1/4 - , or 1/6
- BASED ON EARNINGS FOR CURRENT 12MTH POLICY PERIOD
MONTHLY LIMIT OF LIABILITY - QUESTION
Insured carries $100k business income and elected a 1/4 mthly limit of indemnity option. What is the max tha the insurer will pay ea 30 days up to the limit of the policy?
How many months will the insurer pay for this cvrg?
Monthly Limit of Liability - Answer
- $25,000
- 4 months
EXTRA EXPENSE
payment of extra expense over and above the normal operating costs incurred as a result of direct physical loss of or damage to insured property when
- business must continue at all costs
- no cvrg for loss of business income, profits, fixed, or usual expenses
EXTRA EXPENSE cont (2)
- provides coverage for:
- extra expense incurred to continue operations (eg: newpaper, bank)
- civil authority losses up to the 3 weeks
- newly acquired location up to 30 days (10% of the cvrg limit)
- no cvrg for loss of business income, profits, fixed charges, or usual expenses
EXTRA EXPENSE cont (3)
- can be purchased separately or not at all
- provides loss payments depending on period of loss
- ≤ 30 days: 40% of limit applies
- > 30 DAYS BUT < 60 DAYS: 80% OF LIMIT APPLIES
- > 60 days: 100% of limit applies
EXTRA EXPENSE - QUESTION
Policy Limit = $150k
Restoration Period: 50 Days
What is the max that can be paid by the insurer?
Extra Expense - Answer
- $120,000
> 30 days, but <60 days, so 80% of limit applies
- $150k (limit) x 80% = $120k
BUILDER’S RISK
covers commercial, residential, or farm buildings under construction
- coverage begins - on date construction begins if there is no basement
- on date construction starts above the lowest basement floor if there is a basement - incl building, foundation, and building materials
- w/in 100 ft
- up to $5,000 - Read in the Manual (Big Book)
BUILDER’S RISK cont (2)
- coverage is written for 1 yr but ends when
- property accepted by buyer
- 90 days have elapsed since construction completed
- building is occupied or put to intended use
- insured’s interest ceases
- insured abandons construction
