AINS 103 ALL SECTIONS

Commercial Insurance

Tangible property consisting of land, all structures permanently attached to the land (including fixtures permanently attached to the structure), and whatever is growing on the land

real property

moveable items owned by a business, such as supplies, furniture, computers, machinery, tools, and some vehicles (such as forklifts)

personal property

which peril do you think poses the greatest risk of a large or total property loss for most businesses?

fire

Are the causes of business income losses associated with property exposures typically the same as or different from those for physical damage losses?

same

the possibility that an organization will be held liable because of bodily injury or property damage that either occurs on the organization's premises or results from the organization's ongoing (as opposed to completed) operations

premises and operations liability

the possibility that an organization will be held liable because of bodily injury or property damage caused by either the manufacture, distribution, or sale of an unsafe or defective product or of the entity's completed work.

products and completed operations liability

a grocery store customer is injured when he slips and falls on a wet floor that was just mopped by an employee who failed to put up a warning sign. This is an example of which kind of liability loss exposure?

premises

a family's party guests are injured when the wooden deck that was completed a few weeks earlier by a contractor collapsed. this is an example of which kind of liability loss exposure?

completed operations

a passerby at a contractor's job site is injured by a tool dropped from a ladder by one of the contractor's employees. this is an example of which kind of liability loss exposure?

operations

a consumer dies because of impurities in a medicine sold by a pharmaceutical company. this is an example of which kind of liability loss exposure?

products

any condition that presents the possibility that an organization will sustain a loss resulting from damage to or theft of its property

commercial property loss exposure

key elements of commercial property loss exposures:

property exposed to loss, causes of loss, financial consequences of loss

expenses that continue to be incurred during a business interruption (payroll, debt repayment, leases, taxes, insurance, etc)

continuing expenses

expenses, in addition to ordinary expenses, that are incurred to mitigate the effects of a business interruption (rent on a second location, express shipping of machinery, paying employees overtime, etc)

extra expenses

business income loss =

expected profit loss + expenses

an organization that has a financial interest in an auto, such as a car, truck, van, or trailer, can suffer property loss if that auto is damaged or destroyed. The financial consequences of loss may be a decrease in the auto's value and/or loss of use of the auto until it can be repaired or replaced

property loss exposures

any possibility of financial loss resulting from injury, sickness, or death. Anyone who could suffer injury in an auto accident, such as a delivery driver, has a personal loss exposure. In some cases, organizations can be financially responsible for these exposures

personal loss exposures

stems from the potential for an organization to be held legally responsible for bodily injury or property damage that results from the ownership, maintenance, or use of autos. For example, the negligent operation (or repair) of a company van that results in an accident is an automobile liability loss exposure. If a court deems a company responsible for an auto accident, it could result in damages, defense costs, and reputational harm for the organization.

liability loss exposures

do you think that if an employee uses his own car to perform job duties (such as driving to customers' offices), it creates an automobile liability loss exposure for his employer?

yes (if an employee uses his/her own auto on behalf of a business, the employer is exposed to liability. such instances of liability are typically covered by commercial auto insurance)

insurance that covers many different classes of property that typically involve an element of transportation on land

inland marine insurance

insurance that covers vessels and their cargoes, including various vessel-related liability exposures

ocean marine insurance

an ocean marine carrier is involved in an accident that prevents the carrier from delivering its cargo. As a result, the carrier will lose compensation that the shipper would have otherwise paid the carrier. What type of loss exposure is this an example of?
a. cargo
b. hull damage
c. loss of freight
d. property in the custody of a bailee

c. loss of freight

disability caused by a work-related injury or disease that temporarily limits the extent to which an employee can perform specific duties for a period of time. After that period, the worker is expected to be able to resume all job duties

temporary partial disability

disability caused by a work-related injury or disease that temporarily renders an injured employee unable to perform any job duties for a period of time. After that period, the worker is expected to be able to resume all job duties

temporary total disability

disability caused by a work-related injury or disease that impairs the injured employee's earning capacity for life. The employee is able to work at reduced efficiency

permanent partial disability

disability caused by a work-related injury or disease that renders an injured employee unable to ever return to gainful employment

permanent total disability

Aubree was employed by a temporary employment agency and assigned to a department store during a busy shopping period. While lifting a box, she strained her back and required medical care and rehabilitation. She lost a month's wages. Which employer's workers compensation policy, if any, will provide benefits for Aubree's injury?
a. the department store
b. the employment agency
c. neither
d. both

b. the employment agency

Hannah sells unbranded cell phone accessories online. The goods are imported from China to her warehouse in St. Louis, and then shipped from St. Louis to customers throughout North America. For her business, the greatest value and the greatest risk come from her:
a. customer database
b. customer ratings
c. warehoused goods
d. suppliers

a. customer database (there is value - and risk- in all of these, but it's likely that Hannah's customer data would be hard to replace, and it also presents the greatest risk. A data breach could set off a chain of events that could topple her business much faster than receiving poor customer reviews, losing a supplier, or losing warehoused goods.)

A cell phone manufacturer's management is concerned to learn of the possibility that its largest supplier will soon merge with one of the manufacturer's top competitors. Identify the manufacturer's supply chain exposures (select all that apply to this scenario).
a. loss of supply due to external events
b. supply sourcing
c. political and regulatory risks
d. financial risks

a. loss of supply due to external risks and b. supply sourcing

perils are an important aspect of property insurance. which one of the following statements is correct with respect to perils?
a. property insurance policies can cover specific perils and cannot exclude other perils
b. a peril is the actual means by which property is damaged or destroyed such as fire, lightning, windstorm, hail, or theft
c. in order to be covered by an insurance policy, a peril must be defined and described in that policy
d. a peril is anything that increases the frequency or the severity of a loss

b. a peril is the actual means by which property is damaged or destroyed such as fire, lightning, windstorm, hail, or theft

during a business interruption, some of the organization's expenses, calling continuing expenses, will continue, and other expenses, called noncontinuing expenses, will not continue. which one of the following is an example of a continuing expense?
a. overtime wages to employees
b. cost to rent temporary office workspace
c. payroll of key employees
d. cost of overnight air shipment of needed repair parts

c. payroll of key employees

Radley Contracting Company is installing new signage on the front of a building. George, a passerby walking near the building is injured when a Radley employee accidentally drops a tool from a crane. George likely has the ability to assert which one the following types of claim?
a. premises and products liability
b. premises and operations liability
c. completed operations liability
d. incompleted operations liability

b. premises and operations liability

an electrical contractor was hired to install a new 100-amp fuse box in the Smith's home. during installation, the contractor inadvertently left a small screwdriver in a duct space behind the panel. three weeks later, the screwdriver caused an electrical short which started a fire. which one of the following loss exposures best categorizes the electrical contractor's legal liability exposure for the fire damages?
a. property damage liability
b. liability for operations by others
c. completed operations liability
d. products liability

c. completed operations liability

automobile liability exposures can result from:
a. hiring or borrowing an automobile
b. damage to or destruction of an owned vehicle
c. workers compensation laws
d. loss of use of an owned automobile

a. hiring or borrowing an automobile

the typical workers compensation statute provides payment for which one of the following?
a. medical bills for an injury sustained by an employee while working
b. any property damage that accompanies a bodily injury
c. injuries to customers on the insured premises
d. medical bills sustained while an employee commutes to work on public transit

a. medical bills for an injury sustained by an employee while working

an individual owns a web-based business. all sales records and contact data are maintained on the same network server as the website. someone hacks into the server and deletes all of the saved data. which one of the following types of loss is this?
a. intangible property
b. personal injury
c. tangible property
d. contingent business income

a. intangible property

as part of its assessment of its cyber risk, an organization should consider whether there are any intangible property exposures. which one of the following would best be classified as an intangible property loss?
a. thieves break into the main office and steal several desktop computers
b. two disgruntled employees use the computer system to transfer office funds into their own personal bank accounts
c. the computer system is hacked and data including credit card numbers are stolen
d. there is a fire in the storage area which destroys the backup copy of the office computer system

c. the computer system is hacked and data including credit card numbers are stolen

for most businesses, which one of the following is the peril that poses the greatest risk of a large or total property loss?
a. earthquake
b. windstorm
c. fire
d. flood

c. fire

extra expenses are expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption. Which of the following is an example of an extra expense?
a. insurance premiums
b. cost to rent temporary office space
c. payroll of key employees
d. debt repayments

b. cost to rent temporary office space

the liability loss exposure that exists when an organization is legally responsible for bodily injury or property damage caused by an accident that occurs on an organization's owned, leased, or rented property is:
a. property liability
b. premises and operations liability
c. operations liability
d. professional liability

b. premises and operations liability

a building contractor uses lower grade materials than called for in the specifications for an office building. a year after the building was completed, a balcony collapses, injuring several employees and customers and causing damage to the building and its contents. for the building construction company, this is an example of:
a. a products liability exposure
b. a completed operations liability exposure
c. an operations liability exposure
d. a premises liability exposure

b. a completed operations liability exposure

inland marine insurance is insurance that covers:
a. businesses that own or operate watercraft, or import or export goods
b. companies that ship goods by commercial vessel on inland waterways
c. miscellaneous lines such as burglary, glass, and steam boilers
d. many different classes of property that typically involve an element of transportation on land

d. many different classes of property that typically involve an element of transportation on land

the management of Maryland Marine Co. (MMC) must ensure that proper coverage is obtained for work-related injuries. the employee population of MMC is a mixture of full-time and part-time employees as well as some casual employees for one-time tasks. Much of MMC's work is done by independent contractors and temporary employees during peak seasons. which one of the following statements about these persons is true?
a. temporary employees are considered employees of MMC rather than employees of the firm supplying them to MMC
b. the independent contractors are automatically employees under common law
c. injuries to MMC's full-time ship captains are likely to be covered under state workers compensation laws
d. many states workers compensations statutes exclude casual labor (temporary employees)

d. many states workers compensation statutes exclude casual labor (temporary employees)

an email was sent to a company's employees containing a harmful attachment. several employees opened the attachment which allowed hackers to obtain customer contact information. this cyber risk loss is:
a. damage to intangible property
b. errors and omissions liability
c. damage to tangible property
d. damage to personal property

a. damage to intangible property

Bio-Pharma was a highly-regarded pharmaceutical company. that changed last year when it was revealed that Bio-Pharma researchers had fabricated test results of the company's new hypertension drug, and a company official bribed a key regulator to get the drug approved. these revelations led to a sharp decline in sales of all Bio-Pharma's drugs, a sharp decline in net income, and a decline in Bio-Pharma's stock price. this scenario clearly indicates the value of a corporation's:
a. reputation
b. internal security
c. intellectual property
d. patents

a. reputation

the loss of or damage to property can have adverse financial consequences including reduced property value. which of the following statements is correct with respect to a reduction in value?
a. for insurance purposes, the dollar amount of a reduction in value is the same regardless of the valuation method used
b. if a cell phone is lost or stolen, its decline in value is measured as its replacement cost minus its salvage value
c. when property is lost or destroyed, the limit of insurance is deemed to be the amount of the reduction in value
d. a valuable painting that is repaired after being damaged is likely to have declined in value

d. a valuable painting that is repaired after being damaged is likely to have declined in value

in business income insurance, the expenses that an organization would not have incurred if the business interruption had not occurred are called:
a. excludable expenses
b. extra expenses
c. continuing expenses
d. contingent expenses

b. extra expenses

a family member recently purchased a new home constructed by a residential home builder. two months after taking possession, several of the family members were injured when the roof suddenly collapsed. the family sued the construction company and was awarded monetary damages for their injuries. this is an example of which one of teh following types of commercial liability loss exposure for the construction company?
a. completed operations liability
b. employers liability
c. premises and operations liability
d. products liability

a. completed operations liability

pedestrian Wilma was injured as a result of a contractor's negligence when the contractor failed to adequately warn the public of a hazard when paving a road. any resulting liability claim by Wilma against the contractor would be considered to have arisen from the contractor's:
a. products and completed operations liability exposure
b. absolute liability exposure
c. premises and operations liability exposure
d. personal liability exposure

c. premises and operations liability exposure

a carrier that is prevented by an accident from delivering the cargo aboard its ship may face an exposure called loss of freight, which is:
a. the compensation the carrier receives for transporting cargo
b. a penalty the carrier pays the shipper for nondelivery
c. the cost of disposing of undeliverable goods
d. the liability for loss or damage to the cargo entrusted to it

a. the compensation the carrier receives for transporting cargo

Joe signs a contract with Home Builders to install the electrical wiring for a new home. he uses his own tools and follows the specifications in the contract. Joe is burned while installing the wiring. does Home Builders' workers compensation policy cover Joe's injury?
a. no, because Joe is not an employee of Home Builders
b. no, because Joe probably contributed to the injury
c. yes, because Home Builders must provide no-fault protection for employees
d. yes, because the injury arose out of and in the course of employment

a. no, because Joe is not an employee of Home Builders

the unauthorized intrusion into a company's computer network resulting in damage to intellectual property is best classified as which one of the following types of cyber liability exposures?
a. tangible property
b. loss of use
c. loss of business income
d. intangible property

d. intangible property

the extent of an organization's product of human intelligence that has economic value refers to which one of the following?
a. real property
b. personal property
c. intellectual property
d. business income

c. intellectual property

a commercial building may contain furniture, machinery and equipment and finished products. which one of the following is the term generally used in property insurance policies to refer to all these types of property?
a. inventory
b. business personal property
c. stock
d. commercial property

b. business personal property

a vehicle owner had a tire store install four new wheels and tires on the vehicle. on the way home from the store, one of the wheels came off, causing the vehicle to accidentally run off the road and strike a tree. the vehicle owner sued the tire store for failing to properly tighten the lug nuts on the vehicle. the loss exposure faced by the tire store in this case is known as:
a. completed operations liability
b. automobile liability
c. employers liability
d. products liability

a. completed operations liability

a contractor is hired to install a new concrete sidewalk in front of a store. several weeks after the sidewalk was installed, the concrete buckles and a passerby trips and falls on the buckled sidewalk. the passerby sues the contractor to recover medical expenses incurred due to the fall. this commercial liability loss is categorized as:
a. completed operations liability
b. products liability
c. environmental liability
d. professional liability

a. completed operations liability

a carrier that is prevented by an accident from delivering the cargo aboard its ship may face an exposure called loss of freight, which is:
a. the compensation the carrier receives for transporting cargo
b. the cost of disposing of undeliverable goods
c. a penalty the carrier pays the shipper for nondelivery
d. the liability for loss or damage to the cargo entrusted to it

a. the compensation the carrier receives for transporting cargo

workers compensation benefits include which one of the following?
a. rehabilitation benefits
b. property damage benefits
c. death benefits of 100 percent of wage loss
d. pain and suffering benefits

a. rehabilitation benefits

cyber risk intellectual property loss exposures include:
a. cyber extortion of trade secrets
b. property damage liability
c. personal and advertising injury liability
d. loss to tangible property

a. cyber extortion of trade secrets

Meat Products Company (MPC) runs packing plants in three Midwest states. the company was in the news recently because of its labor practices. The Department of Labor (DOL) investigated complaints from five female employees that MPC discriminated against them. the DOL found the claim was true. The Immigration and Naturalization Service (INS) found that the company employed illegal immigrants and paid them less than the minimum wage. when this news became public, MPC's reputation was severely harmed. this scenario illustrates which source of reputation risk?
a. corporate social responsibility
b. communication and crisis management
c. corporate governance and leadership
d. regulatory and legal compliance

d. regulatory and legal compliance

property insurance policies use the term "personal property" to refer to the:
a. property in transit
b. buildings not attached to the main building
c. contents in and around a building
d. company's copyrights and trademarks

c. contents in and around a building

upon entering a restaurant, a customer grasped a handrail that broke off, causing the customer to fall and break his wrist. this is an example of which one of the following types of commercial general liability loss?
a. premises and operations liability
b. personal and advertising injury liability
c. products and completed operations liability
d. absolute liability

a. premises and operations liability

XYZ contractor, covered under an unendorsed Commercial General Liability (CGL) Coverage Form, is installing kitchen cabinets in a customer's home. the contractor manufactured the cabinets. while the contractor is fastening a cabinet, it falls and injures the customer. which one of the following best explains how coverage under the contractor's CGL Coverage Form applies in this case?
a. products and completed operations liability applies because the contractor was installing cabinets it manufactured
b. premises and operations liability applies because the contractor was working at the customer's premises
c. products and completed operations liability applies because the contractor was completing the work
d. premises and operations liability applies because the contractor was in the process of installing the cabinets

d. premises and operations liability applies because the contractor was in the process of installing the cabinets

to be covered under a workers compensation statute, an injury or disease (in most states) must meet which one of the following requirements?
a. occur away from the regular work premises
b. result in total liability
c. arise out of employees' job-related injuries and diseases
d. result from the employer's negligence

c. arise out of the employees' job-related injuries and diseases

when a clothing manufacturer decides to expand the sale of its clothing line by offering internet purchases, it creates new exposures not otherwise covered, or not fully covered, by a traditional policy. These include:
a. theft of clothing items in their store
b. loss or damage caused by computer viruses
c. fire damage to clothing items currently listed for sale online
d. lightning damage to the computer system used for internet sales

b. loss or damage caused by computer viruses

which of the following supply chain exposures can a business mitigate by carefully wording contracts and diversifying suppliers?
a. strikes or other employment issues
b. production bottlenecks
c. loss of supply due to external events
d. changes in demand

c. loss of supply due to external events

Renata owns a valuable antique sculpture by a famous artist. one day she accidentally dropped the sculpture and a piece of it broke off. Renata took the sculpture to an art restorer, who reattached the broken piece and repaired the surface. from a distance, the statue looks the same as it did before Renata dropped it, but a close inspection reveals the repair. which one of the following best describes the financial consequences of the accident?
a. the only financial consequence of the accident is the money Renata paid the art restorer for the repair
b. the financial consequences include the cost of the repair and the reduction in value resulting from the repaired damage
c. Renata has incurred a total loss because original artwork is impossible to replace
d. there are no financial consequences because the piece looks the same as it did before the accident

b. the financial consequences include the cost of the repair and the reduction in value resulting from the repaired damage

which one of the following is an example of injury or damage arising from an occurrence that would be covered by the products and completed operations liability portion of the Commercial General Liability (CGL) Coverage Form?
a. a customer is injured when she slips on a wet floor in a store
b. a dissatisfied customer sues an insured for slander
c. a defective gas range manufactured by the insured explodes causing injury
d. a customer's house is set on fire while the insured is doing plumbing work

c. a defective gas range manufactured by the insured explodes causing injury

Fancy Dress Shop is a small specialty clothing boutique for women. liability claims against Fancy Dress Shop would most likely arise from its:
a. premises and operations exposure
b. advertising exposure
c. workers compensation exposure
d. products and completed operations exposure

a. premises and operations exposure

the two categories of property that are exposed to loss from cyber risk are:
a. covered and not covered
b. insured and uninsured
c. tangible and intangible
d. real and personal

c. tangible and intangible

an individual owns a web-based business. all sales records and contact data are maintained on the same network server as the website. someone hacks into the server and deletes all of the saved data. which one of the following types of loss is this?
a. tangible property
b. personal injury
c. intangible property
d. contingent business income

c. intangible propertyth

the BPP's basic and broad forms are essentially identical

true

the BPP's basic and broad form both use the named perils approach, meaning they explicitly state the policy's covered causes of loss

true

covers falling objects, weight of ice/snow/sleet, water damage, and is more expensive

broad form

covers anything that the policy doesn't specifically list as being excluded

special form

protects additional types of property, such as newly acquired or constructed property, various types of storage units and trailers, and outdoor property, among others

BPP coverage extensions

the BPP coverage extensions apply only if at least 75% coinsurance or a value reporting period symbol is shown in the declarations

false (its 80%)

Sadie owns a call center business and insures her building and personal property under a BPP. because communications technology changes so rapidly, she leases all of her phone equipment. according to the lease agreement, she is responsible for the replacement cost of the leased phone equipment in the event it is damaged.
Which of the following optional coverages should Sadie consider?
a. debris removal
b. electronic data recovery
c. replacement cost
d. none of the above

c. replacement cost

a limit is set for each building insured

specific basis

the limit applies to all buildings at one location or to all buildings at multiple locations

blanket basis

Hill Top Wholesale experienced a loss from a fire at its warehouse. When the owner, Joann, called to report the loss to the commercial property insurer, she was reminded of certain obligations that the insured must meet in order for the coverage to apply. There are also certain rules that the insurer must follow. Which one of the following components of the commercial property coverage part of the commercial package policy would include these obligations and rules?
A. Commercial property conditions
B. Building and personal property coverage form
C. Causes of loss form
D. Commercial property declarations

A. Commercial property conditions

Which one of the following statements best describes the Causes of Loss—Special Form?
A. The Special Form provides coverage for direct physical losses other than those that are specifically excluded
B. The Special Form contains exclusions that are covered in the Basic and Broad Forms for certain hard to insure perils
C. The Special Form is designed to cover any loss that would not be covered by the Basic and Broad Forms
D. The placement of the "burden of proof" rests with the insured as opposed to the insurer

A. The Special Form provides coverage for direct physical losses other than those that are specifically excluded

Cameron has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss – Broad Form covering his building with a $750,000 limit. A tropical storm struck Cameron's building and the strong winds tore most of the shingles from the building’s roof and shattered multiple windows with flying debris. The total amount of damages was $20,000 for the windows and $20,000 for the shingles. Ignoring any deductibles that may apply, how much will Cameron's insurer pay for damage to his windows and shingles?
A. The damage is not covered
B. $20,000
C. $39,000
D. $40,000

D. $40,000

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP)?
A. The policy limit is the maximum the insurer will pay over any one year
B. No payments under coverage extensions are made if the limit of insurance in the declarations is paid in full
C. The deductible is subtracted from the policy limit
D. Due to coverage extensions, it is possible for the total payment for one loss to exceed the policy limit

D. Due to coverage extensions, it is possible for the total payment for one loss to exceed the policy limit

Dooley’s Restaurant is insured under a commercial package policy (CPP) with the Business Income (with Extra Expense) Coverage Form. The business suffered a $400,000 loss of business income when it was forced to suspend operations after flood waters damaged the basement and first floor of the restaurant. Which one of the following is an acceptable reason for the CPP insurer to deny the business income claim?
A. The business did not earn a profit in the prior 12-month period
B. The policy's covered causes of loss did not include the flood
C. The building was damaged, but not completely destroyed
D. The business planned to resume operations within 120 days

B. The policy's covered causes loss did not include flood

Which one of the following would be considered an extra expense under the Business Income (and Extra Expense) Coverage Form of the commercial package policy?
A. The salary of key employees who will continue to work at a temporary location
B. The increased cost of construction to meet new building codes or ordinances
C. The cost to remove damaged equipment and machinery
D. The increased cost of rent at a temporary location

D. The increased cost of rent at a temporary location

When Sylvester Properties suffered a $500,000 loss of business income, it filed a claim under the Business Income (and Extra Expense) Coverage Form (BIC) of its commercial package policy. In order for the loss to be covered, the loss of business income must be due to a necessary suspension in operations caused by a direct physical loss or damage to property at the premises for which BIC is shown in the policy declarations. Which one of the following is also part of the criteria for the loss to be covered?
A. The suspension of operations must be greater than 60 days
B. The insured must continue operations at a new location
C. The suspension of operations must be less than a year
D. The loss or damage must be caused by a covered cause of loss

D. The loss or damage must be caused by a covered cause of loss

Classic Cashmere Shop (CCS) is insured by a commercial package policy. The Business Income (and Extra Expense) Coverage Form (BIC) has a $900,000 limit of insurance and an 80 percent coinsurance provision. CCS experienced a fire loss which resulted in a $300,000 loss of business income. How much will the insurer pay for this BIC loss if the coinsurance basis at the time of the loss was $1,500,000?
A. $160,000
B. $225,000
C. $240,000
D. $300,000

B. $225,000 (With the coinsurance basis of $1,500,000 and a coinsurance percentage of 80%, the limit of insurance should have been $1,200,000. Because CCS had a $900,000 limit, the insured will only pay .75 (900,000/1,200,000) of the loss. $300,000 x .75 = $225,000

Sally is a commercial property claims adjuster. When she is first assigned a claim, she reviews the commercial property part of the policy to make sure that the property that suffered the loss matches the description of the property insured. She also reviews the kinds and amount of coverage provided. Which one of the following components of the commercial property part will provide Sally with this information?
A. Building and personal property coverage form
B. Commercial property conditions
C. Commercial property declarations page
D. Causes of loss form

C. Commercial property declarations page

Which one of the following is a covered cause of loss under the Causes of Loss—Basic Form?
A. Falling objects
B. Sprinkler leakage
C. Weight of ice, snow, or sleet
D. Water damage

B. Sprinkler leakage

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP) deductible?
A. Under the ISO Commercial Lines Manual rules, the standard deductible must be at least $2,500
B. If the Coinsurance condition or the Agreed Value optional coverages applies, the amount of the loss is first reduced by the deductible before applying any penalty imposed by those provisions
C. If an occurrence involves a loss that affects more than one category of covered property and a separate limit of insurance applies to each category, losses to all categories are totaled and the deductible applied to that total amount
D. The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible

D. The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible

Which one of the following statements about Inflation Guard optional coverage of the Building and Personal Property Coverage Form (BPP) is true?
A. It is automatically added whenever the Agreed Value optional coverage is added
B. It is available only on business personal property
C. It leaves policy limits unchanged while increasing the annual premium by the rate of inflation
D. It is automatically increases the limit of insurance by the percentage of annual increase shown in the declarations

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

Which one of the following statements is true regarding the Business Income (without Extra Expense) Coverage Form?
A. It does not cover any extra expenses
B. It covers only extra expenses incurred within 48 hours of the loss
C. It covers only extra expenses that reduce the business income loss
D. It covers extra expenses only for businesses that must continue their operations as any cost

C. It covers only extra expenses that reduce the business income loss

Lucy’s Bakery is insured under a commercial package policy with the Business Income (and Extra Expense) Coverage Form. A fire loss caused significant damage to the building. When Lucy learned that it would take 9 months to repair the building, she decided to temporarily relocate to a nearby rental location. All of the following would be considered covered extra expenses under the Business Income (and Extra Expense) Coverage Form, EXCEPT:
A. The costs to move some of the ovens to the new location
B. The rent for the new location
C. The salary of the assistant baker and cake decorator
D. The cost to lease mixers and other machinery

C. The salary of the assistant baker and cake decorator

Which one of the following would be covered under the Extra Expense insuring agreement of the Business Income (and Extra Expense) Coverage Form?
A. Costs to move to a temporary location
B. Interest Expense
C. Property taxes
D. Normal operating expenses

A. Costs to move to a temporary location

Sam’s Hair Salon (SHS) is insured under a commercial package policy with the Business Income (and Extra Expense) Coverage Form (BIC). The BIC has a $500,000 limit of insurance and a 70 percent coinsurance provision. A fire damaged SHS’s building and the business was forced to close down for 4 months while the damage could be repaired. This resulted in a BIC loss of $250,000. The salon’s net income plus operating expenses that would have been incurred in the absence of the loss for 12 months beginning at the policy's inception was $700,000. Which one of the following represents the coinsurance basis?
A. $350,000
B. $400,000
C. $500,000
D. $700,000

D. $700,000

Stanton Industries insures its building and business personal property under the commercial property coverage part of a commercial package policy. Anthony is the new risk manager for Stanton Industries. He wants to look at the policy to review the property insured, the kinds and amounts of coverage provided, and any optional coverages. Which one of the following component parts of the commercial property part would provide Anthony with this information?
A. Commercial property conditions
B. Coverage form
C. Commercial property declarations
D. Causes of loss form

C. Commercial property declarations

Worldwide Warehousing has a Building and Personal Property Coverage Form (BPP) with a $1,000,000 limit on a building and a $5,000 deductible. The warehouse suffers a $1,010,000 fire loss. Which one of the following amounts will Worldwide's insurer pay?
A. $995,000
B. $1,000,000
C. $1,005,000
D. $1,010,000

B. $1,000,000

Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store under a Building and Personal Property Coverage Form (BPP) with a $275,000 limit and a $1,500 deductible. A large fire in the store caused significant damage amounting to $310,000 in covered damages. How much would Billy’s insurer pay under his BPP?
A. $273,500
B. $275,000
C. $308,500
D. $310,000

B. $275,000

Hager Incorporated insures its building and business personal property under the Building and Personal Property Coverage Form (BPP). The company suffered a fire loss that destroyed a significant portion of the building and damaged the fence surrounding the building. Assuming that the building is insured for at least 80 percent of its value, coverage extensions under the BPP would provide coverage for which one of the following?
A. Damage to the fence surrounding the building
B. The cost to remove debris from the portion of the building that was destroyed
C. Increased cost of construction to comply with new ordinances or laws
D. The cost to remove pollutants from the neighboring creek

A. Damage to the fence surrounding the building (The fence surrounding the building would be considered outdoor property. It would be covered under BPP coverage extensions which apply only if the building is insured for at least 80 percent of its value. Debris removal and increased cost of construction are considered additional coverages under the BPP.)