Cpcu 551 Chapter 2

Front 1

List - (3) TYPES OF PROPERTY COVERED BY THE BPP (if shown in the declarations) and where BPP covers

Back 1

Property Covered By The BPP three types if shown in the declarations:
1. Building
2. Your Business Personal Property
3. Personal Property of Others

The BPP covers property located at the described locations or within 100 feet of the nearest boundary of the land considered part of the insured premises. Two coverage extensions provide limited coverage for property away from described premises:
1. The Property-Off Premises extension
2. The Newly Acquired or Constructed Property extension

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(3) TYPES OF PROPERTY COVERED BY THE BPP (if shown in the declarations)

1. Building (5 coverages included)

Back 2

1. The building described in the declarations page plus completed additions

2. Permanently installed fixtures (personal property items affixed to the building), including outdoor fixtures

3. Permanently installed machinery and equipment

4. Your personal property used to maintain or service the building including fire extinguishers, outdoor furniture, floor coverings and appliances used for refrigeration, ventilation, cooking, dishwashing or laundering

5. If not covered by other insurance, additions under construction, alterations and repairs, and materials, equipment and supplies, and temporary structures on or within 100 feet of the building used to construct additions, alterations and repairs

Front 3

(3) TYPES OF PROPERTY COVERED BY THE BPP (if shown in the declarations)

2. Your Business Personal Property (7 coverages include)

Back 3

1. Furniture and trade fixtures (fixtures removable by a tenant)

2. Machinery and equipment

3. Stock (items to be sold, including their packaging

4. All your other business personal property

5. Labor, materials and services furnished by you on others' personal property

6. Your use interest in improvements and betterment* you bought (fixtures to real property that change the property and enhance its value -- and which may or may not include repairs and maintenance, depending on the insurer's understanding of improvements and betterments

7. Leased personal property you're contractually obligated to insure

* The landlord's interest in improvements and betterments is insured under the landlord's building coverage. Coexistent insurance on the same improvements and betterments is enforceable since both landlord and tenant have an insurable interest in them

Front 4

(3) TYPES OF PROPERTY COVERED BY THE BPP (if shown in the declarations)

3. Personal Property of Others

Back 4

For organization with commercial bailment exposures (one party - the bailee - holds the property of another - the bailor- for some purpose beneficial to one or both parties.). Loss settlements is made with and payment made to the properties owner

Front 5

Question: The Building and Personal Property Coverage Form is best used to insure

Back 5

Answer: Any combination of Building, Your Personal Property, or Personal Property of Others

Front 6

Question: A tenant has a Building and Personal Property Coverage Form (BPP) insuring only its Business Personal Property. What is true if the tenant adds a room to its leased building?

Back 6

Answer: The room is considered an improvement and betterment and the policy covers the tenant's use interest in the room

Front 7

Question: A printing company owns its building and recently purchased and permanently installed an eight color web printing press. The risk manager is in the process of revising the company's insurance limits to make sure the new printing press is covered under the company's property insurance. When revising the limits, the risk manager should consider the printing press as

Back 7

Answer: Part of the building

Explanation: Building includes permanently installed machinery and equipment

Front 8

Question: A small business owners has a Building a Personal Property Coverage Form (BPP) to cover his property. The owner erected a temporary structures, a little over 50 feet from the main structure, used to make repairs to the building. A covered peril damaged the temporary structure. Is this structure covered?

Back 8

Answer: Yes, the temporary structure is covered because it is less than 100 feet from the main structure.

Explanation: Building includes temporary structures on or within 100 feet of the building used to construct additions, alterations and repairs

Front 9

List - (3) PROPERTY SPECIFICALLY NOT COVERED BY THE BPP

Back 9

Property Specifically Not Covered By The BPP:
1. Buildings and other real property
2. Plants and outdoor property
3. Other personal property

Front 10

(3) PROPERTY SPECIFICALLY NOT COVERED BY THE BPP:

1. Buildings and other real property

Back 10

1. Buildings and other real property: land; water; bridges; paved surfaces; retaining walls not part of the described property; wharves, and docks; pilings; foundations below the basement (or below ground if there is no basement); underground pipes, flues, and drains; and cost of excavation, grading, back-filing, or filing

Front 11

(3) PROPERTY SPECIFICALLY NOT COVERED BY THE BPP:

2. Plants and outdoor property

Back 11

2. Plants and outdoor property: growing crops and lawns; outdoor harvested crops; outdoor trees; shrubs and plants (unless they are stock); outdoor fences; and radio and television antennas and towers

Front 12

(3) PROPERTY SPECIFICALLY NOT COVERED BY THE BPP:

3. Other personal property

Back 12

3. Other personal property: DEMCABS (Deeds, Evidence of debt, money, currency, accounts, bills, securities and notes); vehicles, watercraft, and aircraft (if licensed for use on public roads or principally operated off-premises; animals (coverage includes animals held for sale or boarded by the insured); electronic data (except stock of prepackaged software and electronic data integrated in the building's structure) (there is additional coverage for damage to electronic data) ; the cost to replace valuable papers and records (limited coverage available through coverage extension); contraband; and property more specifically insured under another coverage or policy

Front 13

Question: Bridges, piers, wharves and docks are initially excluded from the Building and Personal Property Coverage Form Primary because
Answer: They require careful underwriting

Back 13

Answer: They require careful underwriting

Front 14

Question: The Property Not Covered in the Building and Personal Property Coverage Form (BPP) are initially excluded either to reduce the amount of insurance needed to satisfy the coinsurance condition or because

Back 14

Answer: These types of property require careful underwriting

Front 15

List - (6) BPP ADDITIONAL COVERAGES

Back 15

(6) BPP ADDITIONAL COVERAGES:
1. Debris Removal
2. Pollutant Cleanup and Removal
3. Preservation of Property
4. Fire Department Service Charge
5. Increased Cost of Construction
6. Electronic Data

Front 16

(6) BPP ADDITIONAL COVERAGES:

1. Debris Removal

Back 16

1. Debris Removal: We'll pay for debris removal of covered property an other debris on described premises (new in 2012 edition of the BPP) if the debris results from a covered loss. You must report the expenses to us within 180 day of the date of the physical loss to be covered. The most we will pay is 25% of the payment for direct damage loss (including your deductible) plus up to an additional $25,000 when debris removal expenses exceed the amount of coverage otherwise available.
This coverage does not apply to the costs to remove
a. your own property that is not covered by BPP
b. property in your possession that is not covered property
c. property owned by or leased to your landlord unless you have contractually agreed to insure the property and it is insured under your policy
d. property that is excluded under the BPP or
e. property of others of a type that would not be covered
This coverage does not apply to the cost to
a. extract pollutants from land or water or
b. remove or restore polluted land or water

Front 17

(3) Examples of Debris Removal Losses

Back 17

(3) Examples of Debris Removal Losses:
1. Debris removal is less than 25 percent of the sum of loss payments plus the deductible
2. Debris removal is greater than 25 of the sum of loss payments plus the deductible
3. Building loss exceeds the amount of insurance

Important:
The most we will pay is 25% of the payment for direct damage loss (including your deductible) plus up to an additional $25,000 when debris removal expenses exceed the amount of coverage otherwise available.

Front 18

(3) Examples of Debris Removal Losses:

EX 1. Debris removal is less than 25 percent of the sum of loss payments plus the deductible

BPP limit: $500,000 on building
Deductible: $1,000
Amount of loss: $10,000 damage to building, $2,000 debris removal

Back 18

Debris removal is less than 25 percent of the sum of loss payments plus the deductible . (*Deductible applies to building loss and debris removal)

Sum of loss payment + deductible = $10,000
$10,000 x 0.25 = $2,500
$2,000<$2,500

Insured collects:
$10,000 (for building damages) + $2,000 (for debris removal) - $1,000 deductible = $11,000

Front 19

(3) Examples of Debris Removal Losses:

EX 2. Debris removal is greater than 25 of the sum of loss payments plus the deductible

BPP limit: $500,000 on building
Deductible: $1,000
Amount of loss: $36,000 damage to building, $22,000 debris removal

Back 19

Debris removal is greater than 25 of the sum of loss payments plus the deductible (*Deductible applies only to building damage NOT debris removal)

Sum of loss payment + deductible = $36,000
$36,000 x 0.25 = $9,000
$22,000>$9,000

Insured collects:
$36,000 (for building damage) - $1,000 deductible = $35,000 (amount collected for direct physical loss)

$35,000 + $22,000 (($9,000 (25% sum of loss payments plus the deductible) plus $13,000 of the additional $25,000) = $57,000

Front 20

(3) Examples of Debris Removal Losses:

EX 3. Building loss exceeds the amount of insurance

BPP limit: $500,000 on building
Deductible: $1,000
Amount of loss: $505,000 damage to building, $60,000 debris removal

Back 20

Building loss exceeds the amount of insurance

Insured collects:
$500,000 (for building damage, limit of insurance) + $25,000 (for debris removal additional limit) = $525,000

The insured's payment is not reduced by the deductible. The deductible is subtracted from the amount of the loss not from the limit, and the remainder exceeds the limit of insurance. Therefore, the insurer pays the full building limit

Front 21

Question: Rich purchases an unendorsed Building and Personal Property Coverage Form (BPP) to cover his small business. A covered loss resulted in $24,000 in damage to Rich's building and $20,000 of debris removal. His policy limit is $100,000 with a $1,000 deductible. The insured calculated the building portion of the loss payment to be $23,000 after applying the deductible. How much will Rich collect from his insured for debris removal

Back 21

Answer:
Debris removal is greater than 25 of the sum of loss payments plus the deductible (*Deductible applies only to building damage NOT debris removal)

Rich will collect $20,000 for debris removal from additional $25,000

Front 22

Question: The Debris Removal addition coverage states that covered debris removal expenses will be made only if they are reported to the insured in writing within how many days or years after the direct physical loss or damage

Back 22

Answer: 180 days

Front 23

Question: The Debris Removal Additional coverage may include the cost to clean up pollutant depending on which circumstances

Back 23

Answer: The cost to clean up debris cause by inured peril that releases toxic chemicals in a building

Front 24

(6) BPP ADDITIONAL COVERAGES:

2. Pollutant Cleanup and Removal

Back 24

2. Pollutant Cleanup and Removal: We'll pay to extract pollutants from land or water at the described premises if their release was caused by a covered cause of loss and if you report the expenses to us within 180 days of the incident. The most we'll pay is $10,000 per covered location per annual policy period

Front 25

(6) BPP ADDITIONAL COVERAGES:

3. Preservation of Property

Back 25

3. Preservation of Property: if property is moved to save it from covered loss, we'll cover any (even war) direct loss to it while it is being move or temporarily stored but only for 30 days from when it was first moved. This protection is subject to the limits of insurance.

Front 26

(6) BPP ADDITIONAL COVERAGES:

4. Fire Department Service Charge

Back 26

4. Fire Department Service Charge: We'll pay up to $1,000 of required department service charges, no deductible

Front 27

(6) BPP ADDITIONAL COVERAGES:

5. Increased Cost of Construction

Back 27

5. Increased Cost of Construction: We'll pay the lesser amount of $10,000 or 5% of the building limit for replacement of a covered building if coverage is on a replacement cost basis. There is no coverage for loss to any undamaged portion of the building that myst be removed or the cost to demolish the undamaged portion and remove the debris

Front 28

(6) BPP ADDITIONAL COVERAGES:

6. Electronic Data

Back 28

6. Electronic Data: We'll pay to replace or restore electronic data that have been destroyed or corrupted by a covered cause of loss. This additional coverage does not apply to 'stock' of prepackaged software and electronic data integrated in the building's structure because these items are specifically excepted from the Property Not Covered section of the BPP. The most we will pay is $2,500 per policy year, not per occurance or location

Front 29

Questions: An insured has an unendorsed BPP providing $500,000 in coverage on it building on a RC basis, with a $5,000 deductible. The insured suffered a covered loss of $100,000 to the building. The debris removal costs were $40,000. The jurisdiction where the building is located does not have any regulations regarding replacement or repair; however, the insured is subject to fire department charges of $1,250. How much coverage will be provided under the addition coverages?

Back 29

Debris removal is greater than 25 of the sum of loss payments plus the deductible (*Deductible applies only to building damage NOT debris removal)

For building:
$100,000 - $5,000 deductible = $95,000

For debris:
25% of loss payment plus the deductible = $25,000
+
$15,000 (from additional $25,000)
= $40,000

For fire department:
$1,000

Front 30

Question: The Business and Personal Property Coverage Form now contains the Electronic Data additional Coverage, which has the noteworthy characteristic of covering

Back 30

Answer: All applicable electronic data damage is deemed to have been sustained in the policy year that an occurrence basis even if damage continues

Front 31

List - (7) BPP COVERAGE EXTENSIONS

Back 31

Seven BPP Coverage Extensions (apply only if 80% or higher coinsurance or value reporting applies - as additional insurance, no coinsurance):

1. Newly Acquired or Constructed Property
2. Personal Effects and Property of Others
3. Valuable Papers and Records (other than electronic data) - Cost of Research
4. Property Off-Premises
5. Outdoor Property
6. Non-Owned Detachable Trailers
7. Business Personal Property Temporarily in Portable Storage Units

Front 32

(7) BPP COVERAGE EXTENSIONS:

1. Newly Acquired or Constructed Property

Back 32

1. Newly Acquired or Constructed Property:
a. You can apply up to $250,000 of your building coverage to any building being built on your premises or to any you acquire elsewhere if for similar use or for use as a warehouse and
b. You can apply up to $100,000 of your contents coverage at any acquired location except fairs and exhibitions (but we're going to charge you for coverage)

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(7) BPP COVERAGE EXTENSIONS:

2. Personal Effects and Property of Others

Back 33

2. Personal Effects and Property of Others: You can apply your contents coverage to personal effects of you, your officers, and your employees (except for loss by theft) and the personal property of others up to $2,500 (a very low limit) at each location.

Front 34

(7) BPP COVERAGE EXTENSIONS:

3. Valuable Papers and Records (other than electronic data) - Cost of Research

Back 34

3. Valuable Papers and Records (other than electronic data) - Cost of Research: You can apply your contents coverage, up to $2,500 at each described premises, for the cost of research to replace information and records other than electronic or magnetic media.

Front 35

(7) BPP COVERAGE EXTENSIONS:

4. Property Off-Premises

Back 35

4. Property Off-Premises: You can apply your contents coverage, up to $10,000, to property, other than stock, temporarily off-premises if not in or on a vehicle, in the care of a salesman, or at any location owned, leased, or operated by you, the insured.

Front 36

(7) BPP COVERAGE EXTENSIONS:

5. Outdoor Property

Back 36

5. Outdoor Property : You can apply up to $1,000 (not over $250 for any one tree, shrub, or plant) to outdoor fences, antennas, signs (not attached to buildings), trees, shrubs, and plants, including debris removal, if damaged by fire, lightning, aircraft, riot, or explosion (FLARE).
There is no coverage for loss by any weather peril.

Front 37

(7) BPP COVERAGE EXTENSIONS:

6. Non-Owned Detachable Trailers

Back 37

6. Non-Owned Detachable Trailers: You can apply up to $5,000 to trailers used in your business; in your care, custody, or control; and for which you have a contractual responsibility to pay for loss or damage. There is no coverage for trailers while attached to motor vehicles, while being hitched or unhitched to a motor vehicle, or that become accidentally unhitched.

Front 38

(7) BPP COVERAGE EXTENSIONS:

7. Business Personal Property Temporarily in Portable Storage Units

Back 38

7. Business Personal Property Temporarily in Portable Storage Units:
can apply up to $10,000 to property in a temporary portable storage unit if the unit is located within 100 feet of the building and the storage unit has been in use for less than 90 days.

Front 39

List - (3) BPP PROVISIONS THAT DETERMINE RECOVERY AMOUNTS

Back 39

(3) BPP PROVISIONS THAT DETERMINE RECOVERY AMOUNTS:
1. Limits Of Insurance
2. Deductible
3. Valuation

Front 40

(3) BPP PROVISIONS THAT DETERMINE RECOVERY AMOUNTS:

1. Limits Of Insurance

Back 40

1. Limits Of Insurance:
The most we'll pay is the limit shown in the declarations, minus the deductible.
The most we'll pay for an outdoor sign (whether or not attached to a building) is $2,500 per sign. The Outside Signs Endorsement provides higher limits and/or broader perils.

Front 41

(3) BPP PROVISIONS THAT DETERMINE RECOVERY AMOUNTS:

2. Deductible

Back 41

2. Deductible: The standard deductible is $500, with rate credits for higher deductibles.
The insurer only pays losses that exceed the deductible, but then it pays up to the coverage limit. The insured pays up to the deductible, plus that proportion of losses that exceed the coverage limit.

Front 42

(3) BPP PROVISIONS THAT DETERMINE RECOVERY AMOUNTS:

3. Valuation

Back 42

3. Valuation:
Here's how we'll determine values:
a. small building losses--if you've complied with the coinsurance clause, we'll pay repair or
replacement cost for losses of $2,500 or less except for losses to awnings, floor coverings,
appliances, and outdoor equipment and furniture.
b. stock that you've sold but not yet delivered will be valued at its sales price.
c. glass at replacement cost, with safety glazing if required.
d. tenant's improvements and betterments
1) at ACV if you repair them promptly;
2) at your original cost times the number of days left in your lease, including renewal
options, divided by the number of days from when you installed them to the end of
your lease options; or
3) nothing if others pay for their repair or replacement.

Front 43

List - (4) BPP OPTIONAL COVERAGES

Back 43

BPP OPTIONAL COVERAGES:
1. Agreed Value Optional Coverage
2. Inflation Guard Optional Coverage
3. Replacement cost (RC) 4. Extension of replacement cost coverage to property of others

Front 44

(4) BPP OPTIONAL COVERAGES:

1. Agreed Value Optional Coverage

Back 44

1. Agreed Value Optional Coverage: waives the coinsurance clause until the statement of values (lists the ACVs of the property to be insured) expires (annually).
If the coverage option is not renewed, the coinsurance condition is reinstated.
Covered losses are paid in full, each subject to the deductible.
To put agreed value coverage into effect,
a. the insured must submit a statement of values to the insurer and
b. the insurer must consent to agreed value coverage.
If the insurance limit is less than the agreed value, the insurer's payment equals [(the insurance limit times the loss amount) divided by (the agreed value)] minus the deductible.

Loss payment = ((limit of insurance/agreed value) x loss) - deductible

Front 45

Question: A building and its contents are insured under BPP with the agreed value option in effect. The limit of insurance is $100,000 with a $5,000 deductible. The agreed value shown in the policy is $1,500,000. How much will the insurer pay if the insured sustains a $300,000 loss by an insured peril?

Back 45

Answer:
Loss payment = ((limit of insurance/agreed value) x loss) - deductible

(($1,000,000/$1,500,000)x($300,000)) - $5,000 = $195,000

Front 46

(4) BPP OPTIONAL COVERAGES:

2. Inflation Guard Optional Coverage

Back 46

2. Inflation Guard Optional Coverage: increases the insurance limit, pro-rata, by the annual percentage shown in the declarations.
Advantage: It helps maintain adequate coverage during periods of high economic inflation.

Front 47

(4) BPP OPTIONAL COVERAGES:

3. Replacement cost (RC)

Back 47

3. Replacement cost (RC) coverage: is made available when the insurer is willing to assume the increased moral hazard inherent in RC coverage.
There is usually no additional charge but the insured needs a higher coverage limit since the coinsurance clause is then based on the higher RC--even if settlement is made based on ACV because the property is not repaired or replaced.
Property not covered at RC includes property of others (available by extension), residence contents, manuscripts, works of art, antiques, rare artifacts, and stock.
Improvements and betterments are covered.
To start, the insured may base his claim on ACV.
If so, he has 180 days from the date of loss to notify the insurer of his intent to switch to RC coverage. Then, he must repair or replace the property as soon as reasonably possible to receive RC coverage.

Front 48

(4) BPP OPTIONAL COVERAGES:

4. Extension of replacement cost coverage to property of others

Back 48

4. Extension of replacement cost coverage to property of others: covers personal property of others for which the insured is legally liable for loss or damage, up to the amount for which the insured is legally liable.
The extension of replacement cost coverage to property of others responds to contracts the insured has entered into that require the insured to cover property of others on a replacement cost basis