Commercial Package Policy and Commercial Property Coverage- From Exam Outline

Interline Endorsements

used to coordinate coverage in one part with the others to avoid duplicate coverage.

Cancellation by insured

premium is returned on a short-rate basis

Cancellation by Insurer

premium is returned on a pro-rata basis.

Examination of Books and Records

can audit the insured’s books anytime during the policy period and up to 3 years after the policy expires.

General Commercial Conditions

Concealment, misrepresentation, or fraud, control of property, insurance under two or more coverages, legal action against us, liberalization, no benefit to bailee, other insurance, valuation, policy period/territory, and subrogation.

Causes of Loss Forms

Basic, broad, and special. Different ones can be selected for different properties listed on the policy.

Basic Form Coverages

Fire, lightning, extended coverages (WHARVES), VMM, sprinkler leakage, sinkhole collapse, and volcanic action.

Additional Coverage Limit for Fungus, Wet Rot, Dry Rot, and Bacteria on Basic and Broad Forms

$15,000 for all covered losses in a 12-month period.

Broad Form Coverages

Fire, lightning, extended coverages (WHARVES), VMM, sprinkler leakage, sinkhole collapse, volcanic action, falling objects, weight of ice, snow, or sleet, and water damage.

Excluded from ALL Causes of Loss Forms

Steam boiler explosion

Collapse Additional Coverage on Broad Form

covers a collapse from a covered peril, the breakage of building glass, building decay, insect or vermin damage hidden from view, weight of people or personal property, or weight of rain on the roof.

Special Form Coverages

Open perils coverage with the same exclusions and additional coverages on the basic and broad form. Also includes some theft protection.

Theft

Excluded from the basic and broad form but included on the special form with limitations.

Special Form Exclusions

Loss of use, wear and tear, rust, smog, infestation of animals or insects, dishonest or criminal acts, escape of pollutants.

Special Form Coverage Extensions

Property in Transit, Water Damage and Other Liquids, Powder, or Molten Material Damage, Glass. 

Property in Transit

Coverage for personal property being transported to the coverage territory on/in a vehicle owned, leased, or operated by the insured. Loss must be from covered perils with a $5,000 limit in addition to the limit of insurance.

Building and Personal Property Coverage Form- Business Personal Property

Must be in or on the described location or in a vehicle within 100 feet of the location to be covered by perils in the causes of loss form that was selected.

Building and Personal Property Coverage Form- Additional Coverages

Debris removal, preservation of property, pollutant clean-up removal, increased cost of construction, and electronic data.

Debris Removal- Additional Coverage

Coverage is subject to a maximum of 25% of the loss amount. However, if the sum of the loss amount and debris removal expenses exhausts the limit of insurance, the policy will pay up to an additional $25,000 per occurrence for debris removal.

Preservation of Property- Additional Coverage

Insured property that is being moved or temporarily stored at another location because it is endangered by a covered peril will be protected on an open perils basis for up to 30 days.

Fire Department Service Charge- Additional Coverage

As an additional amount of insurance, up to $1,000 is provided for the payment of fire department service charges when the department is called to protect insured property. No deductible applies to this coverage.

Pollutant Clean-Up and Removal- Additional Coverage

If the discharge or escape of pollutants is caused by or results from a covered peril, this coverage will pay up to $10,000 for the insured’s expenses to extract pollutants from land or water. This limit is an aggregate limit for all extraction expenses during each 12-month period of the policy, paid in addition to the limit of insurance.

Increased Cost of Construction- Additional Coverage

This Additional Coverage only applies to buildings covered by the Replacement Cost Optional Coverage. If a building is damaged by a covered peril, the Additional Coverage pays for the increased costs to comply with enforcement of an ordinance or law regulating the repair, rebuilding, or replacement of damaged parts. This coverage provides up to $10,000 or 5% of the limit of insurance applicable to the damaged building, whichever is less. This limit is in addition to the policy limit.

Electronic Data- Additional Coverage

The Additional Coverage pays for the cost to replace or restore electronic data that has been destroyed or corrupted by a covered cause of loss, up to $2,500 for all loss sustained in any one policy year. Coverage is in addition to the policy limit.

Coverage Extensions

Newly acquired or constructed property, personal effects and property to others, valuable papers and records, property off premises, outdoor property, non-owned detached trailers, and business personal property temporarily in portable storage limits. 

New Acquired or Constructed Property- Coverage Extension

Coverage may be extended to cover new buildings to be constructed on the described premises, and newly acquired or constructed property at other locations. The coverage limit is $250,000 at each building. Coverage may also be extended to cover newly acquired business personal property, limited to $100,000 at each building. Coverage is not provided for the personal property of others.

Personal Effects and Property of Others- Coverage Extension

Personal effects of the insured (including those of the insured’s partners, officers, members, managers, and employees) and the personal property of others in the insured’s care, custody, and control are covered for up to $2,500 at each described premises. Coverage for the insured’s personal effects does not include loss by theft.

Valuable Papers and Records (Other than Electronic Data)- Coverage Extension

pays for the replacement or restoration of these items and provides $2,500 at each described premises unless a high limit is shown in the declarations.

Property Off Premises- Coverage Extension

Coverage may be extended to covered property that is temporarily at a location the insured does not own, lease, or operate, including while it is at a fair, trade show, or exhibition. Property in or on a vehicle is excluded, as is property in the custody of a salesperson who is not at a fair, trade show, or exhibition. The limit of insurance is $10,000.

Outdoor Property- Coverage Extension

provides up to $1,000 for each loss to outdoor fences, radio and television antennas, satellite dishes, trees, shrubs, and plants, all of which are usually excluded by the coverage form. The loss must result from fire, lightning, explosion, riot or civil commotion, or aircraft. A $250 sublimit applies to any one tree, shrub, or plant.

Non-Owned Detached Trailers- Coverage Extension

The insured must have a contractual responsibility to pay for the loss, and the trailer cannot be attached to any vehicle. Coverage is also not provided during the hitching or unhitching process. Unless a higher limit is shown in the Declarations, the limit of insurance is $5,000, which is excess insurance over any other applicable coverage.

Business Personal Property Temporarily in Portable Storage Units- Coverage Extension

coverage may be extended to apply to property temporarily stored in a portable storage unit, including a detached trailer, located within 100 feet of the described building or premises. The maximum amount of insurance is $10,000. Coverage ends 90 days after property has been placed in the storage unit, and coverage will not apply if the storage unit has been located at the described premises for more than 90 consecutive days.

Limit of Insurance for Outdoor Signs

$2,500 per sign per occurrence

Loss Conditions for Building and Personal Property Coverage Form

Abandonment, appraisal, duties in the event of loss or damage, loss payment, recovered property, vacancy, and valuation.

Vacancy for Building and Personal Property Coverage Form

unless at least 31% of the total square footage is used by the building owner to conduct customary operations or is rented to a lessee and used by the lessee to conduct its customary operations. Buildings under construction are not considered vacant. If the building has been vacant for more than 60 consecutive days, the policy will not pay for any loss or damage resulting from vandalism, sprinkler leakage, building glass breakage, water damage, or theft (including attempted theft). If loss or damage results from any other covered peril, a 15% penalty is applied to the amount payable.

Builders Risk Coverage Form

Provides property coverage for buildings or structures under construction including foundations, fixtures and machinery, equipment used to service the building, materials used for construction that are owned by the insured, and temporary structures such as scaffolding. Perils insured against is determined by the causes of loss form selected for the property form.

Builders Risk Coverage Form Extensions

Building materials and supplies of others and sod, tree, shrubs, and plants. Limit of insurance for plants is $1,000 and no more than $250 per plant.

Builders Risk Coverage Form-Policy Period

expired or cancelled, property is accepted by purchaser, the insured’s interest in the property ends, the insured abandons construction, 90 days after the construction is complete, or 60 days after any covered building is partially or fully occupied or put to intended use.

Builders Risk Coverage Form Conditions

Abandonment, appraisal, duties in the event of loss or damage, loss payment, recovered property, and mortgage holders. There is NO vacancy condition on the form.

Builders Risk Coverage Form Valuation

Losses are settled on an actual cash value basis. 

Completed Value Form

Form for Builders Risk Coverage that states the property must be insured for its full completed replacement value no matter what stage of construction the loss occurs during. Too little coverage will result in a penalty that proportionately reduces the amount payable from losses.

Reporting Form Endorsement

Allows the insured to carry a smaller amount of coverage at policy inception and the coverage gradually increases as the completion date draws closer. Coverage is based on monthly report, and the premium will continue to change.

Condominium Association Coverage Form

Designed for properties insured in the name of a condominium association, and coverages are essentially the same as those in the Building and Personal Property Coverage Form. This is for the association that owns the building.

Condominium Association Coverage Form Coverages

coverage for business personal property only applies to personal property owned by the insured or collectively by all unit-owners, the insured’s interest in labor or services, and personal property leased to the insured that they are required to insure.

Condominium Commercial Unit-Owners Coverage Form

This form is used for unit-owners as the commercial lines alternative to the personal lines Unit-Owners Homeowners Policy HO-6. Coverage is provided for the insured’s business personal property, such as: Furniture, Machinery and equipment, Stock, Personal property that is used in the business and owned by the insured, leased personal property for which the insured is contractually obligated to insure, Fixtures, improvements, and alterations owned by the insured and making up part of the building.

Legal Liability Coverage Form

provides coverage for the insured’s legal liability for loss or damage to real or personal property owned by others when it is in the insured’s care, custody, or control and is damaged by a covered peril. The form also covers loss of use of the property, and the insurer will provide a defense. It is most commonly written for the tenant of a commercial building when the tenant, under the terms of a lease, is legally responsible for damage to the building.

Business Income and Extra Expense Coverage Forms

time element coverages or business interruption coverages, provide insurance for two distinct types of indirect loss that result from the necessary suspension of the insured’s operations due to a covered property loss: the loss of business income and extra expenses incurred after the loss.

Business Income Coverage

profit or loss before income taxes that would have been earned had the covered loss not occurred, plus normal, ongoing operating expenses, including payroll. Coverage is provided during the period of restoration.

Period of Restoration

72 hours after the time of loss and ends on the earlier of the date when the property should be repaired or rebuilt within reasonable speed, and the date when business is resumed at a new permanent location.

Extra Expenses Coverage

necessary expenses incurred by the insured during the period of restoration that would not have been incurred had the covered loss not occurred. The expenses are used to minimize the suspension of business by continuing operations at the described location or at a temporary replacement location, in which case relocation expenses and costs to equip the temporary location are covered. The period of restoration for extra expense coverage begins immediately.

Types of Coverage Forms that Provide Time Element Coverages

Business Income and Extra Expense Coverage Form, Business Income Without Extra Expense Coverage Form, and Extra Expense Coverage Form.

Optional Coverages for Business Income and Extra Expense Coverage Forms

Maximum Period of Indemnity, Monthly Limit of Indemnity, Business Income Agreed Value, and Extended Period of Indemnity.

Maximum Period of Indemnity

The most the insurer will pay for the loss of business income is the amount of loss sustained during the first 120 days of the period of restoration. The coinsurance provision will not apply.

Monthly Limit of Indemnity

The most the insurer will pay for a loss of business income is a specified portion of the limit of insurance, calculated for each 30-day period of the period of restoration. The coinsurance provision will not apply.

Business Income Agreed Value

The insurer uses a report of the insured’s financial data to determine an agreed value. If the limit of insurance is less than the agreed value, that percentage is used to determine the amount of each loss for which the insured is liable. This replaces the policy’s standard coinsurance percentage.

Extended Period of Indemnity

The suspension of operations may result in a loss of business income even after repairs or rebuilding is completed and operations are resumed. If this is the case, the policy will pay for this business income loss for a specified number of days after operations are resumed, or until generated business income returns to the level generated prior to the loss, whichever occurs first.

Selected Commercial Property Endorsements

Ordinance or Law Coverage, Spoilage Coverage, Peak Season Limit of Insurance, Value Reporting Form, Earthquake and Volcanic Eruption Endorsement

Ordinance or Law Coverage Endorsement

This endorsement responds if the enforcement of any building, zoning, or land-use law, results in:

• The loss in value of the undamaged portion of a building because of enforcement of an ordinance or law that requires demolition of the undamaged parts of a building (Coverage A)

• Demolition and site clearance of the undamaged parts of a building (Coverage B)

• Increased cost of repairing or reconstructing damaged parts of a building, reconstructing or remodeling undamaged portions of the building, or both (Coverage C). This coverage also applies to foundations, pilings, underground pipes and drains, and the cost of excavations.

Spoilage Coverage Endorsement

Coverage is provided for perishable stock owned by the insured or in their care, custody, or control at the insured premises. The endorsement names two covered causes of loss for which the insured may select coverage:

• Breakdown or contamination, including changes in temperature or humidity as a result of mechanical failure of refrigeration, cooling, or humidity-control equipment at the insured location and contamination by the refrigerant (the working fluid in a refrigerator)

• Power outage, meaning a change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or off the insured premises and beyond the insured’s control

Peak Season Limit of Insurance Endorsement

Coverage is provided for a specified increase in the business personal property limit of insurance during a designated period of time, such as the Christmas shopping season, to provide additional coverage to account for an increased amount of stock. The insured chooses the property for which the value will be increased, the amount of the insurance, and the applicable time period.

Value Reporting Form (Full Value Form) Endorsement

Under this endorsement, an insured who owns business personal property that fluctuates in value is protected for the values actually at risk, based on periodic reports of the value. Reports are filed either daily, weekly, monthly, quarterly, or annually, as indicated in the Declarations.The insured pays an advance premium at the beginning of the policy period. The final premium is calculated at the end of the policy year using the average of values reported to the insurer.

Earthquake and Volcanic Eruption Endorsement

This endorsement amends the Causes of Loss forms attached to the policy to add coverage for the perils of earthquake and volcanic eruption. All earthquake shocks and volcanic eruptions that occur within any 168-hour period are considered a single earthquake or volcanic eruption. If this period begins before policy expiration, the end of the policy will not reduce the 168-hour period. Separate deductibles apply to each building, personal property located at each building, and personal property in the open. The deductibles are chosen by the insured as a percentage of the limit of liability applying to each class of property.

Inland Marine Definition

used to insure property (goods and merchandise) while on land, though no coverage is provided for the vehicle itself.

Ocean Marine Definition

provides protection to property being transported by vessels crossing domestic and foreign waters and does provide protection for the vessel itself.

Aviation Insurance Definition

covers physical damage to and liability arising out of the use of aircraft.

Nationwide Marine Definition

Eligible property MUST contain an element of transportation and property must be in transit, be movable, or bear a relationship to transportation or communication.

Commercial Inland Marine Insurance Causes of Loss Form

open perils basis and can include the Collapse Additional Coverage

Commercial Inland Marine Insurance Exclusions

Governmental action, war, weather conditions, dishonest and criminal acts of an insured, theft by someone entrusted with the property, neglect of the insured to use reasonable means to save property from further damage, voluntary parting with the property, unauthorized instructions to transfer property, delay, loss of use, loss of market, or other indirect loss.

Commercial Inland Marine Conditions

Abandonment, Appraisal, Duties in the Event of Loss, Loss Payment, Other Insurance, Pair, Sets, or Parts, Recovered Property, Reinstatement of Limit After Loss, Limit of insurance is not reduced by the payment of any claim- except for a total loss of a scheduled item, and Transfer of Rights of Recovery Against Others to Us

Commercial Inland Marine Lines

controlled and uncontrolled