Describe each of the following categories provided under the

Building and Personal Property form:

(a) Your Business Personal Property

(b) Building

Your building Personal Property is property not permanently attached to a building. BPP includes Property Owned by the insured, Materials and Services Furnished on property of others in the insureds Care Custody and Control and Leased Property.  BPP includes Furniture, Fixtures, stock, Machinery and equipment. Personal property used in the businss or owned by the insured. Interests in tenant improvements Items leased under dcontract and stock.

Building coverage is for structures permanently attached to real property.  Buildings break down to permanently attached fixtures, completed additions, permanently installed machines and equipment, equipment used to maintain the building appliances additions under construction

The Commercial Lines program uses a “causes of loss” approach

to provide three tiers of coverage. (3 points)

(a)briefly describe the three causes of loss coverage forms

(b)Give three examples of losses covered under the special causes

of loss form that are not covered under either of the other causes of

loss forms. (3 points)

In what ways does the functional building valuation endorsement

modify the coverage that normally would apply under a “commercial

property” policy that includes the BPP?

A functional building valuation endorsement is important when a building are unique in construction. It is a form modified replacement cost coverage designed to respond to the increased cost of using special processes to restore the building to it original glamore. While a replacement cost or ACV coverage could replace the building using current building technology  and materials, the artistry of the older building would be covered to restore an older building.

An insured has $ 600,000 replacement cost coverage limit on their

office building with a 80% co-insurance percentage applying. The

deductible is $1,000 for this building. The insured suffers a fire

damage loss of $ 200,000. The claim adjuster reviews the claim

and notes the buildings replacement cost valuation is $1,000,000.

Based on these facts, discuss what the claim adjuster’s

recommendation is likely to be regarding insurance company’s

claim payment to the insured?

The calculation for adjusting the claim is (did/(should) x coinsurance)x (amount of covered loss) – deductible so $600,000 / ($1,000,000 x 80%) x $200,000 –

1)      $1,000,000 x 80% = 800,000 (minimum amt of insurance to meet requirements)

2)      $600,000 / $800,000 = 0.75

3)      $200,000 X .75 = $150,000

4)      $150,000 - $1,000 ded = $149,000 is the most paid the remaining $51,000 is not covered.

Briefly discuss why an insured might want a blanket insurance limit

applying to multiple building locations and business personal

property under a single commercial property form vs. having

specific insurance limit covering each building separately within the

same policy.

Blanket insurance can provide more flexible coverage than specific insurance. 1) A blanket can enable the insured to purchase a higher limit of insurance per building elements of the insurance that are relative to the insured value such as debris removal would also increase 2) Contents of mulitiple buildings could shift between buildings thus one coverage could cover the BPP as it shifts for the warhouse to the stores and back. The key however is that purchasing 4 1 million dollar policies is less cost effective than purchasing a 3.5Million Dollar blanket policy which would enable the purchaser to stay within a 80% coinsurance yet enable coverage of $3.5 million to be available on any one building.

Briefly explain the coverage provided by the Ordinance or Laws

Coverage form.

Ordinance or Law Coverage is a commercial property endorsement that covers losses that result from the enforcement of new building codes (ordinances) or new laws.  The coverage has three parts. Part A covers demolition.  Part B covers Debris Removal and part C coveres the increased cost to repair or reconstruct damaged property (also known as increased cost of construction).

An insured which has fluctuating inventory values each month may

decide to cover their inventory values on a monthly Value Reporting

Form. Describe the problems associated with the reporting

requirement of this type of coverage approach to insuring business

personal property.

The insured has a building which has been vacant for over 80 days.

What problems does that cause the insured regarding coverage

under an unendorsed commercial property coverage form (Building

and Business Personal Property Coverage form with Special Cause

of Loss form)?

The Commercial Lines program uses a “causes of loss” approach

to provide three tiers of coverage. (3 points)

(a)briefly describe the three causes of loss coverage forms

(b)Give three examples of losses covered under the special causes

of loss form that are not covered under either of the other causes of

loss forms. (3 points)

There are three coverage forms Basic, Broad and Special Form. 

Basic causes of loss formbasic causes of loss formA named-perils option of the commercial property policy that covers eleven named perils. is a named-perils option of the commercial property policy that covers named perils they are fire lightening, windstorm hail, smoke aircraft or vehicles, riot sinkhole and volcanic eruption.

Broad form includes weight of snow and ice, water damage, falling objects and glass breakage.

The special causes of loss formspecial causes of loss formAn open perils or all risk coverage option for the commercial property policy. is an open perils or all risk coverage option for the commercial property policy. That Special Form instead of listing perils that are covered, the special form provides protection for all causes of loss not specifically excluded. Among the catastrophe exclusions are boiler or machinery explosions also excluded are wear and tear, smoke from agricultural smudging, and damage to a building interior caused by weather conditions (unless the building exterior is damaged first).  Examples of converge under special form would be employee dishonesty and loss of property that appears to have been stolen.  Certain types of property such as patterns, dyes, furs, jewelry, and tickets are covered against theft up to specified amounts. The special form also provides coverage for property in transit.

Only the first named insured can request cancellation.

Insurer Responsibilities:

1) Notice must be delivered at least 10 days for non-payment of premium

2) 30 days for other reasons.

3) Return of premiums goes to first named insured.

The insurer has the right to examin books and records for upto 3 years after policy termination.

Right ot audit records at nytime during policy period.

The insured is required to report final figures to the insurer and the insurer may acceopt the insurd's report without verification. However, if an onsite inspection is deisred this condition allows the insurer to do that.

Insurer may also do this in the event of a claims loss.

A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms.

1) Concealment, Misrepresntation of Fraud

- misrepresentation of any material fact voids the policy

2) Control of Property

- if insured does not have control of property any act of negligence by others will not affect coverage. (rented building)

3) Insurance Under two Policies

- insurer will pay no more than actual loss amount.

4) Legal Action Agains Us

- before the insured can sue or otherwise bring legal action against the insurer under the terms of the insurance policy, the insured must comply with all the policiy's terms and must initiaate any such action against the surrer within two years of the date of the loss.

5) Liberaliztion

without requesting additional premium insurer can expand coverage. No need to send an additional endorement.

6) No Benefit to Bailee

Sometimes property is damaged while in care custody and control of a commercial bailee.

7) Other Insurance

- insurer will pay its part on a prorata basis

- insurer will pay excess for dissimilar policies

8) Policy Period and Coverage Territory

the policy period is determined by the date(s) or time period shown on the policy declarations page. It usually starts at 12:01 a.m. standard time of the address shown in the declarations.

The coverage territory is the United Statates, Puerto Rico, and Canada.

9) Transfer of Rights Recovery Agains Others to Us

this condition describes the insurers right to recover from third parties who may be responsible for damage to the covered proprty. (subrogation).

This right can be waived.

The standard valuation approach in many commercial property forms is acutal cash value (ACV). generally defined as:

replacement cost- depreciation.

Replacement cost is determined at the time and location of the loss.

Thus depreciation is based on property's remaining useful physical life rathern than the amouns charged as depreciation in the accounting records.

Calculation: If a roof had damage and was 10 years old with an expected 15 year lifespan. To Replace = $9,000

$9,000 - (10/15 x $9,000) = $3,000

"new for old" replacement basis.

The insured can replace damaged property with a new item.

If a roof cost $9,000 to replace today the insured would get a $9,000 roof.

Commercial property coverage forms often value sotck that has been sold but not delivered at its selling price, less any discounts or unincurred expenses.

Example:

If a hardware store sold a riding lawn mower worth $2,000 and purchased it for $1,200, the store would get $2,000 if destoryed by a covered peril. They would not get any profit from delivery charges or set up charges.

Underinsurance is a serious problem for both insurers and insureds. to obtain adquate premiums based on the insurance rates used, insurers seek to obtain a premium based on an amount of insurance that is 80 to 100 percent of the property's full value.

The goal is insurance to value!!!

Because insured's believe that a chance of a total loss is so remote they buy lower limites the coninsurance applies to partial losses too.

Note: if the policy is written for replacement cost, the covered property's value is replacement cost.

If the policy is written for ACV, the property's value