Commercial Property Insurance: Causes of Loss, BPP & Coinsurance

Which statement is correct with respect to the covered causes of loss under the Causes of Loss—Basic Form?

Explosion includes the explosion of gases or fuel in a furnace or flue.

Which is covered by the Causes of Loss—Special Form but not by the Causes of Loss—Basic Form?

Melting of ice, sleet, or snow on the building structure.

Which best describes coverage for crime losses under the commercial property policy Causes of Loss—Basic Form?

There is coverage for building damage caused by burglars breaking in or exiting the insured's property.

The Causes of Loss—Special Form states that it covers "risks of direct physical loss." What must the loss or damage be?

It must be unforeseen and accidental from the insured's perspective.

What does the Insurance Under Two or More Coverages condition state?

The total payment under all applicable coverage parts is limited to the actual amount of the loss.

What does the Recovered Property condition of the BPP allow the insured to do?

The insured has the option of taking the recovered property before refunding the loss payment to the insurer.

What happens if an insured conceals a material fact pertaining to covered property?

The commercial property coverage part voids coverage.

Murphy Corporation has a Basic Form covering its building. A windstorm damages the roof. Is the damage covered?

Yes.

A building is insured for $200,000 under an agreed value policy, has a $10,000 deductible, an agreed value of $220,000, and suffers a $43,000 loss. How much will the insurer pay?

$33,000.

What does Inflation Guard optional coverage do?

It automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.

What right does the insurer have regarding the insured's books and records under the CPP?

The insurer has the right to conduct an on-site inspection of the insured's books and records.

What is correct about the Inspections and Surveys common condition of the ISO Commercial Package Policy?

The insurer does not make safety inspections and does not guarantee that conditions are safe or healthful.

What valuation method uses new property of like kind and quality and adjusts for depreciation?

Actual cash value.

What is correct regarding fire under the Causes of Loss—Basic Form?

The Basic Form does not define fire, but courts have held that fire insurance covers only damage by hostile fire.

What required component of the commercial property coverage part specifies the perils covered?

Causes of loss forms.

What type of collapse is covered under the Causes of Loss—Broad Form Additional Coverage for Collapse?

Abrupt falling down of part of the insured's building.

What best describes the Causes of Loss—Special Form?

It provides coverage for direct physical losses other than those specifically excluded.

Which exclusion is unique to the Causes of Loss—Special Form?

Wear and tear.

What are the two ways flood coverage for buildings and contents is available?

NFIP and Flood Coverage Endorsement.

How can BPP coverage extensions affect the total payment for one loss?

Coverage extensions can make the total payment for one loss exceed the policy limit.

Worldwide Warehousing has a BPP with a $1,000,000 building limit and a $5,000 deductible. It suffers a $1,010,000 fire loss. How much will the insurer pay?

$1,000,000.

Which is a covered cause of loss under the Causes of Loss—Basic Form?

Vandalism.

How are the Peak Season endorsement and Value Reporting Form similar?

Both provide a way to avoid overinsuring or underinsuring fluctuating merchandise values.

What is correct regarding the burden of proof under the Causes of Loss—Special Form?

It shifts the burden of proof as to whether a loss is covered from the insured to the insurer.

Which is a covered cause of loss under the Causes of Loss—Basic Form?

Volcanic action.

What happens if an insured conceals a material fact pertaining to covered property under the Concealment, Misrepresentation, or Fraud condition?

The commercial property coverage part voids coverage.

What is blanket insurance?

One limit of insurance for a combination of business personal property and building(s).

Warren Corporation has a $15 million fire loss under its layered property insurance program. How much does each insurer pay?

Insurance Company A pays $1 million; Company B pays $10 million; Company C pays $4 million; Company D pays nothing.

Who can cancel the ISO Commercial Package Policy by mailing or delivering written notice of cancellation?

The first named insured on the declarations page.

What is insurance that shows a separate limit for each building and a separate limit for personal property in each building called?

Specific insurance.

Underinsurance is a serious problem for whom?

Both insurers and insureds.

For nonpayment of premium, how many days before cancellation must notice be mailed or delivered?

10 days.

Property value is $400,000, coinsurance is 80%, insurance limit is $320,000, deductible is $1,000, and loss is $33,000. How much will the insurer pay?

$32,000.

Property value is $400,000, coinsurance is 80%, insurance limit is $240,000, deductible is $1,000, and loss is $33,000. How much will the insurer pay?

$23,750.

A home that burns down when a wildfire breaks out is a loss due to hostile fire.

True.

Earthquake is a covered peril when an insured has a commercial property policy with a Causes of Loss—Broad Form attached.

False.

Under the doctrine of concurrent causation, if a property loss can be attributed to two causes—one excluded and one covered—the policy covers the loss.

True.

Losses caused by looting during a riot would be covered under a Broad Form.

False.

Murphy Corporation has a Causes of Loss—Special Form. A river overflows and rising water damages the building's hardwood floors. Is the damage covered?

No.

BPP endorsements are useful for several tasks. What are they NOT used to do?

Avoid state insurance regulations.