Unit 11 Cram Sheet

Commercial Property Insurance

Coverage for commercial real property (buildings) and business personal property

4 requires parts of commercial property policy

1- Commercial property declarations

2- commercial property conditions

3- one or more property coverage forms

4- Causes of loss form (basic, broad, or special)

Control of Property Condidition

States that an act of neglect by a person outside the insured’s control will not affect the insurance. This condition is applied per property the insured has.

Legal action against us condition

Gives the insured 2 ears to bring an action against the insurer

Other insurance condition

Policies written on the same basis will cover losses pro rata.

If written on different basis, policy will be excess coverage

Transfer of rights of recovery against others to us condition

Gives the insurer subrogation rights so they can pay the insured what is owed by the 3rd party and then collect that money from the 3rd party afterwards

Concealment/fraud condition

Occurrence of either one voids coverage

No benefit to Bailee

A bailee (someone with care/custody/control of the insureds property will not be reimbursed by the commercial property policy

Liberalization Condition

If additional coverage is created and added by the insurer during the policy period or within 45 days of the policies effective date, it will automatically be added to all policies at no additional premium

Policy period and coverage territory conditions

Losses must occur during the policy period and within the specified territories (US, territories, Puerto Rico, and Canada) to be covered

Business and personal property form

Most commonly purchased commercial property form

What is covered under the building section of the building and personal property commercial form

-Completed additions

-fixtures

-permanently installed machinery and equipment

-personal property used to maintain or service the premises (ex: fire extinguisher)

-outdoor furniture, floor coverings, and appliances

-materials, equipment, supplies, and temporary structures within 100 ft of main dwelling

What does personal property of others cover

covers property damage to property of others if it is in the insured’s care, custody, or control, regardless of liability

Business Personal Property

*Property in the open, in the building, or in a vehicle within 100 ft is covered

-furniture

-fixtures (shelves, light fixtures)

-machinery

-equipment

-inventory stock

-value of labor, parts, or services on the personal property of others on premises

-tenant’s improvements

-leased personal property

Excluded business personal property (1-6)

1- money, accounts, food stamps, notes, and securities

2- animals (unless boarded/held for sale)

3- bridges, roads, walks, patios

4- contraband

5- cost of excavations and other ground preparation

6- foundations of buildings, structures, and machinery

Excluded personal property (7-11)

7- land, water, growing crops, lawns

8- bulkheads, piers, wharves, docks

9- underground pipes

10- vehicles (autos, watercraft, and aircraft) for use on public roads, principally operated away from premises, or for sale

11- fences, antennas, signs NOT attached to building, and trees shrubs plants (IF found outside the building)

What is the coverage for signs attached to the building

$2500

Additional Coverages for commercial property (5)

1- Debris Removal

2- Property Removal (30 days)

3- Fire Department Service Charge ($1000, no deductible)

4- Pollutant Cleanup and Removal ($10,000 per period)

5- Electronic Data ($2500 per period)

Debris Removal Coverage

25% of direct loss amount plus deductible with an additional 25,000 available if needed

Coverage Extensions

Not automatically included. Require 80% coinsurance or purchasing that specific reporting form

Newly acquired/constructed property coverage extension

$250,000 for building, 30 day coverage

$100,000 for business personal property, 30 day coverage

Personal property of others coverage extension

$2500 coverage excluding theft

Valuable papers and records

$2500 coverage excluding electronic data

Property off premises

$10,000 coverage for property in storage or temporarily elsewhere, excluding in a vehicle

Outdoor property coverage extension

$1000 aggregate limit with a $250 limit for any one tree, plant, or shrub

Nonowned detached trailer coverage extension

$5000 limit that applies when the insured is contractually obligated to pay for damages

6 Conditions/Duties in the event of a loss

1- prompt notice/description of loss

2- notify policy if crime

3- protect property from further damages and keep record of expenses

4- provide company an inventory of damaged property if requested

5- allow the insurer to inspect damage and testify under oath if requested

6- provide signed proof of loss within 60 days if requested

Loss payment

Will be provided within 30 days after sworn statement of loss (notice of how the insurer will value the loss)

Valuation

Majority of losses are settled with ACV

Losses less than $2500 covered with replacement if 80% coinsurance met

Vacancy

Coverage for vandalism, glass, breakage, theft, and water damage excluded if vacant more than 60 days

All other losses reduced by 15%

Sold Stock valuation

net selling price

tenants improvements valuation

ACV

Mortgage Holder Condition

States that the mortgage holder will be paid losses and must also be given notice of cancellation. 10 days notice required for nonpayment/nonrenewal, and 20 days notice for any other reason

Coinsurance

Typically 80% coinsurance required, and Insurance payment will follow the formula: loss * (coverage / required coverage) minus deductible

Builder’s Risk

A form to add to commercial property policy that covers commercial, residential, and farm building under construction, typically 1 yr contracts

What is covered in addition to the building with Builders risk form

Materials and equipment within 100 ft of the premises that will become a permanent part of the building, and the foundation

What are the 5 ways the builder’s risk coverage can be terminated

1- the property is accepted by the purchaser

2- 90 days have elapsed from construction completion or 60 days have elapsed from building occupation/use

3- the building is occupied or put to its intended use

4- the insured’s interest in the property ceases

5- the insured abandons the construction with no intention of completion

Completion Value Form

states that the policy limit will equal the building value on the date of completion

Builder’s Risk Reporting Form

Form that allows insured to report the building value throughout the construction process, increasing the policy coverage/limit based on current ACV throughout the process. Requires 100% coinsurance!

Condominium Association Form

Form covering the building and business personal property of the condominium association. Does NOT cover the individual personal property of condo unit owners, that is what HO-6 is for

Commercial Unit Owner Form

Form providing coverage for the business personal property of individual commercial unit-owners

Ex: covers the property of someone renting a condo to run their business out of

Time Element Coverage Forms

Forms that cover indirect financial losses such as lost business income and extra expenses incurred during the time normal operations are suspended (slowed or stopped altogether) due to a covered peril

Extra Expenses Coverage Form

Coverage to avoid closure for businesses that MUST remain open, ex: a hospital

Expenses to reduce loss

Coverage included when extra expenses form is NOT used.

Covers necessary expenses to avoid further loss of income

Business Income from dependent properties coverage form (3 locations definitions)

1- Contributing Location: provides raw materials to the insured

2- recipient location: Primary buyer of the insured’s goods

3- Manufacturing location: provides manufactured materials/components to the insured

Business Income from dependent properties coverage form (3 locations coverage variations)

Each one covers loss of income due to losses affecting the contributing, recipient, or manufacturing location that prevents them from doing their part in the insured’s supply chain, causing the insured to lose money

Legal Liability Coverage Form

Covers property of others when insured if legally liable

Business Income from Dependent Properties: Leader Location

Will cover losses due to loss to a leader company that usually attracts customers to the insured’s business

Basic Peril (specific differences from norm)

Covers sprinkler leakage, sinkhole collapse, volcanic action (not eruption), and up to $15,000 for fungi, wet/dry rot, and bacteria

Special conditions for collapse peril on broad form

NOT covered if underlying cause was known and not fixed, but is always covered directly after construction/remodeling, even if defective materials were used (NOT insured’s fault, so covered)