ExamFX Chapter 3 Commercial Lines

Package policy

Two or more lines of coverage combined into one insurance policy. A homeowner's policy is a true package policy because it combines property insurance with liability insurance.

Monoline Policy

A policy written separately as a single coverage.

Components of a commercial policy

General Liability. Commercial property (direct and indirect coverages). Inland Marine. Commercial Auto. Equipment and Breakdown (Also known as boiler and machinery). Crime. Farm

What are the modular parts of contract A?

Policy cover. Common policy Declarations. Interline endorsements (apply to more than one coverage part to eliminate redundancy). Line (s) of insurance Declaration page. Line of insurance coverage form. Common policy conditions. Line of insurance condition. Causes of loss forms. Endorsements

If there is no premium amount shown for a coverage, is there coverage for it?

No

Cancellation

First named insured may cancel the policy at any time by giving written notice to the insurer

Changes

Changes can be made only by endorsement issued by the insurer. Requests for change must be from first insured

Examination of books and records

Can audit the books for a period of up to 3 years (36 months) after the end of the policy

Inspections and Surveys

insurer's right, but not duty, to inspect the insured operations during the policy period; insurer may give insured the report and recommendations but is not required to do so

Premiums

Payment of the premiums is the responsibility of the first named insured. All refunds issued to first named insured

Transfer of rights and duties

Rights and duties of the insured under the policy can be transferred to another only with the written consent of the insurer. However, in the event of the insured's death, rights and duties are automatically transferred to the insured's legal representative.

Interline endorsements

coordinate the coverage in multiple coverage parts of the policy to prevent redundancy

Commercial Property

Business property, including office space, shopping centers, stores, theaters, hotels, and parking facilities

What is the main commercial package form used to cover buildings, business personal property, and property of others?

The buildings and personal property coverage form

What kind of form is the buildings and personal property coverage form?

Direct damage form

Is a percentage of building coverage automatically included in the building and personal property coverage form?

No

If the insured wants a particular building covered, what do they need to do?

It needs to be listed in the declerations with an appropriate limit of insurance

If no limits are shown.....

No coverage exist

Building Coverage

insures the building described in the declarations, outdoor fixtures and furniture, items used to service the property, permanently installed machinery and equipment, and additions under construction, including the materials, supplies and equipment.

Busines Personal Property Coverage (BPP)

Covers business personal property located in or on the building or structure described in the declerations or in the open, within 100 feet of the building or structure, or within 100 feet of the premises, whichever is greater

What does BPP cover?

Furniture and fixtures. Machinery and equipment. Stock. All other personal property owned by insured and used in their business. Labor, materials or services on personal property of others. Improvements to building. Property that they have leased out to them.

Personal Property of Others

covers personal property that is located at the described premises or within 100 feet of the premises and in the insureds care, custody, or control.

Additional coverage under the Business and Personal Property Coverage Form

Debris Removal. Preservation of property. Fire department service charge. Pollutant cleanup and removal. Increased cost of construction. Electronic data.

Coverage extensions if property has an 80% or more coinsurance percentage or a value reporting period

Newly acquired or constructed property. Personal effects and property of others. Valuable papers and records. Property off premises. Outdoor property. Nonowned detached trailers.

What are the additional loss conditions in the building and personal property coverage form?

Abandonment. Appraisal. Duties in the event of loss or damage. Loss payment. Recovered property. Vacancy. Valuation.

What is the only way that vacancy can be waived in a policy payout?

If there is a vacany permit endorsement

What are the optional coverages under the building and personal property coverage form?

Agreed Value. Inflation guard. Replacement cost. Extension of replacement cost to personal property of others

Builders risk coverage form

A commercial property form that covers buildings under construction.

Property covered under the builders risk coverage form

The building or structure, temporary structures, including foundations, fixtures, machinery, equipment, materials, and supplies within 100 feet of the premsises if intended to become a permanent part of the building

Property not covered under the builders risk coverage form

Land or water, outdoor lawns, trees, shrubs or plants, radio and television antennas, satellite dishes, and signs

Coverage period on the builders risk form

Coverage begins on the date construction starts, and ceases when its completed or abandoned with no intent to complete it

What are the additional coverages under the builders risk coverage form?

Debris removal. Preservation of property. Fire department service charge. Pollutant cleanup and removal.

What are the coverage extenions under the builders risk coverage form?

Building materials and supplies of others. Sod, trees, shrubs and plants

What are the 3 forms that insured's can get coverage for indirect losses under Commercial Package Policy (CPP)?

Business Income with Extra Expense. Business Income without Extra Expense. Extra Expense

Business income =

net profit or loss (before taxes) + continuing normal operating expenses to include payroll

What is another way you can refer to business income

Time element coverage or business interruption coverage

Extra Expenses

expenses incurred by the insured above their normal operating costs during the period of restoration and to minimize suspension.

Suspension

means the slowdown or cessation of the insured's business activities

Operations

Means business activity at the premises described in the declerations

Period of Restoration

Begins 72 hours after the direct physical loss for business income. It begins immediately for extra expense coverage.

Resumption of Operations

a condition exists that allows the insurer to reduce the amount of the loss if the insured does not resume operations as quickly as possible

Civil Authority

Coverage extended if insured suffers a business income or extra expense loss because a neighboring property (not more than 1 mile from the described premise) is damaged by a loss covered in the insured's policy and requires a suspension of the insured's operations or a civil authority needs unimpeded access to the property

Extended Business Income

This additional coverage pays for the loss of business income, even after operations have been resumed, until the business has been restored, but for no more than 30 days from the date business is resumed.

Maximum Period of Indemnity

Option that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration or (2) the policy limit

Monthly limit of Indemnity

optional coverage
allows insured to establish amount of reimbursement for loss of business income during each 30 day period

Business income agreed value

Suspends the Coinsurance condition as long as the insured carries an amount of business income insurance that is equal to the value agreed on by the policyholder and the insurer

Extra expense coverage form

Covers additional expenses incurred by the insured business to continue operations following a direct loss by a peril insured

Is coisnurance applicable in the extra expense form?

No

Equipment breakdown coverage form

can be used to cover losses due to the accidental breakdown of covered equipment, such as steam boilers, refrigeration equipment, and computer equipment

What are the other coverage provided by the Equipment Breakdown form

Expediting expenses. Spoilage damage. Utility interruption. Newly acquireed locations. Ordinance or law. Errors and omissions. Brands and labels. Contingent business income and extra expenses, or extra expense only coverage

How is property insured for a loss under the Equipment breakdown form?

Replacement cost basis

Commercial Property Conditions Form

* Concealment, misrepresentation, or fraud coverage. Coverage will be voided.
Control of property-This states that any act or negligence by persons not unmder the direction of the insured will not void coverage
*Ins under 2 or more coverages- If more than one coverage under policy can respond to the same loss, the insurer will pay more than the actual loss.
*Leagal action against insurer
*Liberalization-
*No benefit to bailee
*Other Insurance
*Policy period coverage terriorty
*Transfer of rights of recovery against others (subrogation)

What are the 3 causes of loss forms in Commercial Property Coverage

Basic, Broad, Special

Limit for furs and fur garments

$2,500

Limit for jewelry

$2,500

Limit for patterns and dies

$2,500

Limit for stamps, tickets

$250

Businessowners Policy (BOP)

A package policy that combines most of the property and liability coverages needed by small and medium-size businesses.

Is there a seperate premium for property and liability coverage under the business owners policy (BOP)?

No

What is the standard valuation for BOP policies as long as it is insured up to 80% of the properties replacement cost?

Replacement cost

If a BOP is insured for less than 80% of the ERC, what is the valuation method?

Actual Cash Value

Can all businesses be insured under a BOP?

No

What are the typical business that are eligible for BOP policies?

Office buildings. Apartments and residential or commercial condominiums. Mercantile, processing and service establishments. Contractors. Restaurants. Convenience Stores

What is the eligibility rule for office buildings under a BOP policy?

No more than 6 stories high. And up to 100,000 square fett

What is the eligibility rule for retail and service businesses?

Up to $6,000,000 in annual gross sales. Up to 35,000 square feet in floor space

What is the eligibility rule for convenience stores with gas pumps?

No more than 50% of gross sales may come from gasoline sales. No auto service or auto washing services

What the eligibility rule for fast-food restaurants?

Up to 7,500 square feet. Beer and wine sales are permitted subject to 25% of gross sales

Can car sales places typically get a BOP policy?

No

Can bars and grills typically get a BOP policy?

No

Can places of amusement typically got a BOP policy?

No

BOP Section 1

property

What is business owners property coverage available for?

Buildings, business personal property, or both

What does the Businessowners Property Coverage form cover?

Risks of direct physical loss to covered property, subject to certain limitations and exclusions

What are the limitations of the businessowners policy?

Hot water boilers, steam boilers, steam pipes

What percent is the debris removal provided up to for Businessowners Policies?

25% / reported within 180 days / additional $10,000

What is the preservation of property covered for under Businessowners Policies?

30 days

What is the fire department service charge covered for under Businessowners Policies?

$2,500

What is the limit for money order and counterfeit paper currency under a businessowners policy?

$1,000

What is the fire extinguisher systems recharge expense under a businessowners policy?

$5,000

What is the electronic data coverage under a businessowners policy?

$10,000

What is the coverage for fungi, wet rot, and dry rot under a businessowners policy?

$15,000

What are the coverage extensions that can be added on a Business Property Policy?

Newly acquired or constructed property. Personal property off premises. Outdoor property. Personal effects. Valuable paper and records, cost of research. Accounts receivable

Newly acquired or constructed property under a Business Property Policy?

$250,000 for building being built on premises and buildings acquired at a new premises. $100,000 for newly acquired business personal property (BPP). Coverage only applies for 30 days or until end of policy period, whichever is first

Personal property off premises under a Business Property Policy?

$10,000 for Business Personal Property (BPP) other than money and securities, during transit or temporarily at the premises the insured does not own, use, lease, or operate

Outdoor Property coverage under a Business Property Policy?

For radio, antennas, detached signs, trees, shrubs and plants. Up to $2,500 aggregate but not more than $1,000 per tree or shrub

Personal effects coverage under a Business Property Policy?

Up to $2,500 for personal affects at properties owned by the insured, officers, partners or members of the insured, and employees.

Valuable papers and records, Cost of research coverage under a Business Property policy?

Up to $10,000 for cost to research, replace, restore lost information. Up to $5,000 for valuable papers and records

Accounts receivable coverage under a Business Property policy?

$10,000 on premises. $5,000 off premises

How much are outdoor signs attached to the building covered for?

$1,000 per sign

What are the 2 provisions found on the Business Property Coverage Form?

Building Limit, Automatic Increase. Business Personal Property Limit, Seasonal Increase.

Building Limit—Automatic Increase

the limit of insurance for the building will automatically be increased annually by 8% or the percentage amount shown in the declarations

Business Personal Property Limit-Seasonal Increase

The limit for business personal property will be automatically increased by 25% for seasonal fluctuations unless otherwise specified in the Declarations. This increase is only applicable if the insured carries insurance equal to 100% of the average monthly values for the past 12 months.

What coverages does the deductible not apply to?

Fire department service charge, fire extinguisher system recharge expense, business income, extra expense, civil authority coverages

What are the 4 general conditions under a BOP?

Control of property. Mortgage holders. No benefit to Bailee. Policy period, coverage territory

Optional coverage under a BOP?

Outdoor signs. Money and securities. Employee dishonesty. Equipment breakdown protection

Money

Currency, coins, bank notes, and sometimes traveler's checks, credit card slips, and money orders held for sale to the public.

Operations

Insured's business activities occurring at the described premises

Period of Restoration

Begins 72 hours after the direct physical loss for business income. It begins immediately for extra expense coverage.

Pollutants

Any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste

Specified causes of loss

Fire, lightning, explosion, theft, windstorm, hail, earthquake, flood vandalism or collision