Unit 11: Commercial Property Insurance

Question 1

Commercial Property

Answer 1

• Commercial property declarations
• Commercial property conditions
• One or more property forms
• Cause of loss form (basic, broad, or special)

Question 2

Conditions

Answer 2

Attached to EVERY commercial property policy

Concealment or fraud voids coverage

Question 3

Conditions

Control of property

Answer 3

Condition states that an act of neglect of a person beyond the insured’s direction or control will not affect the insurance

Question 4

Conditions

Legal action against us

Answer 4

Gives the insured two years to bring an action against the insurer

Question 5

Conditions

Other insurance condition

Answer 5

• Pro rata: if policies are written on the same basis
• Excess: if the policies are not written on the same basis

Question 6

Conditions

Policy period and policy territory

Answer 6

Loss must occur during the policy period and in the covered territory; usually the US and its territories

Question 7

Conditions

Transfer of rights of recovery against others to us

Answer 7

Condition gives the insurance company subrogation rights

Question 8

Conditions

No benefit to bailee

Answer 8

Bailee is not reimbursed by insured’s commercial property insurance

Question 9

Conditions

Liberalization

Answer 9

• More coverage without more premium
• 45 days of policy’s effective date

Question 10

Building

Answer 10

• Completed additions
• Fixtures, including outdoor fixtures
• Permanently installed machinery and equipment
• Personal property used to maintain or service the premises, such as fire extinguishers
• Outdoor furniture, floor coverings, and certain appliances
• Materials, equipment, supplies, and temporary structures within 100 feet of the described premises

Question 11

Business personal property

Answer 11

• Furniture (desks, chairs, etc.)
• Fixtures (shelves, light fixtures, etc.)
• Machinery
• Equipment
• Stock
• The value of labor, parts, or services on the personal property of others
• Tenants’ improvements and betterments
• Leased personal property

Question 12

Excluded Personal Property

Answer 12

• Money, accounts, food stamps, notes, and securities
• Animals, unless they are boarded or held for sale
• Bridges, roads, walks, patios, and other paved surfaces
• Contraband (illegal property transported or traded)
• Cost of excavations and other ground preparation
• Foundations of buildings, structures, and machinery
• Land
• Bulkheads, pilings, piers, wharves, and docks
• Underground pipes
• Vehicles, including watercraft and aircraft, that are licensed for use on public roads or are principally operated away from the premises

Question 13

Excluded Personal Property (while outside of buildings)

Answer 13

• Fences
• Antennas (including satellite dishes)
• Signs not attached to the building ($2,500 for coverage is available for attached signs)
• Trees, shrubs, and plants

Question 14

Additional Coverages

Answer 14

• Debris removal: remove debris caused by a covered peril; up to 25% of the amount paid for direct loss to covered property plus the deductible; additional $25,000 if needed
• Property removal - 30 days
• Fire department service charge - $1,000, no deductible
• Pollutant cleanup and removal - $10,000 per policy period
• Electronic data - $2,500 for all loss or damage sustained in any one policy year

Question 15

Coverage Extensions

Answer 15

• 80% coinsurance has been met
• Newly acquired or constructed property
• $250,000 - building - 30 days
• $100,000 - personal property - 30 days
• Personal property of others - $2,500 - not bailee
• Valuable papers and records - other than electronic data - up to $2,500
• Property off premises - $10,00
• Outdoor property - fences, antennas, satellite dishes, trees, plants, and shrubs - $1,000 - $250 limit applying to any one tree, plant, or shrub
• Nonowned detached trailers - $5,000

Question 16

Conditions and Duties in the Event of Loss

Answer 16

• Prompt notice of loss
• Notify police if a crime
• Protect property from further damage
• Provide company an inventory or damaged property (if requested)
• Allow insurer to inspect damage
• Signed proof of loss within 60 days (if requested)

Question 17

Loss Payment

Answer 17

30 days after sworn statement of loss

Question 18

Valuation

Answer 18

• How loss will be settled (ACV)
• Loss less than $25,000 replacement

Question 19

Vacancy

Answer 19

Vacancy more than 60 days

• Vandalism, glass breakage, theft, and water damage excluded
• All other losses reduced by 15%

Question 20

Mortgage Holder

Answer 20

• 10 days’ notice if insurance canceled
• Mortgage holder will be paid losses

Question 21

Coinsurance

Answer 21

Loss x (did carry / should carry)

Question 22

Optional Coverage

Answer 22

• Agreed value
• Inflation guard
• Replacement cost

Question 23

Builders Risk

Answer 23

• Buildings under construction
• Materials and equipment on premises or within 100 feet
• Foundation
• Termination

Question 24

Builders Risk - Termination

Answer 24

• The property is accepted by the purchaser
• 90 days have elapsed since construction was completed
• The building is occupied or put to its intended use
• The insured’s interest in the property ceases
• The insured abandons the construction with no intention of completing it

Question 25

Completed value form

Answer 25

Policy limit equals building value on the date of completion

Question 26

Builders Risk Reporting Form

Answer 26

• Insured reports values during construction
• No more coverage than the last report
• 100% coinsurance required

Question 27

Condominium Association Form

Answer 27

Covers property belonging to the association

• Buildings
• Personal property belonging

Doesn’t cover personal property of condo owner (HO-6)

Question 28

Commercial Unit Owner

Answer 28

Covers business personal property of condo owners

Question 29

Time Element Coverage Forms

Answer 29

Business income

Covers loss of income and expenses due to suspension of business following a covered loss

Question 30

Extra Expense

Answer 30

Coverage to avoid closure for businesses that must remain open (e.g. hospital)

Question 31

Expenses to Reduce Loss

Answer 31

Covers necessary expenses to avoid further loss of income

Question 32

Business Income from Dependent Properties

Answer 32

• Contributing location: provides raw materials to the insured
• Recipient location: primary buyer of the insured’s goods
• Manufacturing location: provides manufactured goods to the insured

Question 33

Extra Expense Coverage Form

Answer 33

Reimbursement for extra expenses

Time element coverage

Question 34

Legal Liability Coverage Form

Answer 34

Covers property of others only if insured is legally liable

Question 35

Basic Peril Coverage

Answer 35

• Fire
• Lightning
• Explosion
• Wind or hail
• Smoke
• Aircraft or vehicles
• Riot or civil commotion
• Vandalism
• Sprinkler leakage
• Sinkhole collapse
• Volcanic action (does not cover land movement)
• Fungus, wet rot, dry rot, and bacteria - $15,000 maximum

Question 36

Broad

Answer 36

All of basic plus

• falling objects (does not cover damage to interior property unless the exterior of the building is damaged first
• weight of snow, ice, or sleet
• water damage (accidental discharge or leakage of water)
• collapse caused by any broad peril plus: breakage of glass, hidden decay, hidden insect damage, weight or people or personal property, weight of rain that collects on a roof, use of defective material or methods in construction

Question 37

Special (open)

Answer 37

Covers all direct causes of loss

Exclusions

Question 38

Value reporting endorsement

Answer 38

Allows insured to report values (usually on a monthly basis) to establish limits of coverage

No loss paid greater than the last report

Question 39

Ordinance or law endorsement

Answer 39

Pays for additional costs of repair or replacement due to building ordinances or laws

Question 40

Spoilage endorsement

Answer 40

Covers perishable stock (refrigerated)

Question 41

Earthquake and volcanic eruption

Answer 41

Land movement