unit 11: Commercial Property Insurance

Commercial property declarations

Provides detailed information about the insured property, including location, coverage amounts, and forms attached.

Commercial property conditions

Conditions that apply to every commercial property policy, detailing the obligations of both the insurer and insured.

Control of property condition

Neglect by someone beyond the insured's control won't impact the insurance coverage.

Legal action against us

Gives the insured two years to bring a lawsuit against the insurer.

Other insurance condition

Pro rata applies if policies are written on the same basis; otherwise, excess coverage applies.

Policy period

Specifies when coverage starts and ends.

Coverage territory

Usually covers the United States, its territories, Puerto Rico, and Canada.

Transfer of rights of recovery

The insurance company gains subrogation rights after paying a claim.

Concealment or fraud

If the insured conceals or misrepresents facts, coverage is void.

No benefit to bailee

A bailee cannot be reimbursed by the insured's commercial property insurance.

Liberalization

Insured gets broader coverage if the insurer introduces it without additional premium, within 45 days of the policy's effective date.

Building and Personal Property

Covers the building, business personal property, and the personal property of others within 100 feet of the premises.

Building

Includes completed additions, outdoor fixtures, permanently installed machinery and equipment.

Business personal property

Includes furniture, fixtures, machinery, equipment, stock, and other property inside or within 100 feet of the building.

Tenants' improvements and betterments

Permanent changes made by a tenant to a rented space that become part of the building.

Excluded Personal Property

Money, animals, bridges, roads, vehicles, contraband, land, and other items specifically excluded from coverage.

Debris removal

Covers up to 25% of the loss amount plus deductible for removing debris from a covered peril.

Property removal

Provides coverage for property temporarily moved to protect it from a covered peril for up to 30 days.

Fire department service charge

Pays up to $1,000 for fire department service fees, with no deductible.

Pollutant cleanup and removal

Covers up to $10,000 per policy period to remove pollutants caused by a covered peril.

Electronic data

Coverage limit of $2,500 per policy year for damage or loss of electronic data.

Newly acquired or constructed property

Provides coverage of up to $250,000 for buildings and $100,000 for personal property for 30 days.

Personal property of others

Up to $2,500 for damage to others' property in the insured’s care, custody, or control.

Valuable papers and records

Covers up to $2,500 for the loss or damage to valuable papers and records, excluding electronic data.

Property off premises

Provides $10,000 coverage for personal property temporarily away from the insured premises.

Outdoor property

Limited coverage for fences, antennas, satellite dishes, trees, and shrubs, with limits of $1,000 total and $250 per tree, shrub, or plant.

Nonowned detached trailers

Covers up to $5,000 for damage to trailers not owned by the insured but used in the insured’s business.

Prompt notice of loss

The insured must promptly notify the insurer after a loss.

Notify police if a crime

Police must be notified in case of a loss due to crime.

Protect property

The insured must protect the property from further damage.

Provide inventory of damaged property

The insured must provide an inventory of damaged property, if requested.

Allow inspection

Insured must allow the insurer to inspect damaged property.

Signed proof of loss

Insured must provide a signed proof of loss within 60 days if requested.

Loss Payment

Insurer must pay a claim within 30 days after receiving the insured's sworn statement of loss.

Valuation

Losses are generally settled at actual cash value (ACV), except for losses under $2,500 which are settled on a replacement cost basis.

Vacancy

If a building has been vacant for more than 60 days, certain perils are not covered, and other losses are reduced by 15%.

Mortgage holder

Mortgage holder will receive notice 10 days before cancellation and will be paid for losses.

Coinsurance

A penalty applies if the insured does not carry sufficient coverage, calculated as Loss × (Did carry / Should carry).

Agreed value

Suspends coinsurance if the insured and insurer agree on a specific value of the insured property.

Extended period of indemnity

Extends business income coverage beyond the period of restoration.

Maximum period of indemnity

Limits business income coverage to the first 120 days following the loss.

Monthly limit of indemnity

Limits business income recovery to a specified fraction of the total coverage limit per month.

Builders Risk

Covers buildings under construction, including materials and equipment within 100 feet of the insured premises.

Builders Risk Reporting Form

Insured must report property values as construction progresses, and coverage is limited to the value reported.

Condominium Association Form

Covers buildings and personal property owned by a condominium association but excludes coverage for the condo owner's personal property.

Commercial Unit Owner

Covers business personal property for commercial condo unit owners.

Business Income Coverage

Covers loss of income due to suspension of business operations caused by a covered loss.

Extra Expense

Covers additional costs necessary to avoid closing the business after a covered loss.

Expenses to Reduce Loss

Covers necessary expenses to minimize further loss of income after a covered loss.

Business Income from Dependent Properties

Covers income loss due to damage at a contributing, recipient, or manufacturing location.

Extra Expense Coverage Form

Covers extra expenses incurred to keep a business operational after a covered loss.

Legal Liability Coverage Form

Covers property of others in the insured’s care, but only if the insured is legally liable.

Basic Perils

Covers fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicles, riot, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

Fungus, Wet Rot, Dry Rot, and Bacteria

$15,000 limit for losses caused by fungus, wet rot, dry rot, and bacteria.

Broad Perils

Includes all basic perils plus falling objects, weight of snow, ice, or sleet, water damage from accidental discharge, and collapse from specific causes.

Special Perils

Provides "open peril" coverage, meaning it covers all risks except those specifically excluded.

Exclusions

Excludes losses from wear and tear, rust, corrosion, pollution, settling, cracking, mechanical breakdown, and dishonest acts.

Value Reporting Endorsement

Allows the insured to report fluctuating property values during the policy period, with coverage limited to the last reported value.

Ordinance or Law Endorsement

Covers increased costs due to building codes or ordinances after a covered loss.

Spoilage Endorsement

Covers perishable stock that is spoiled due to breakdown or power outage.

Earthquake and Volcanic Eruption Endorsement

Covers loss or damage caused by earthquakes or volcanic eruptions, excluding land movement.