CPCU 551: Chapter 3

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hborgert
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16347
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CPCU 551: Chapter 3
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2010-04-27 22:24:11
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Building Personal Property Coverage Forms
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CPCU 551; Chapter 3
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  1. What three general categories of property (corresponding to the three coverage agreements) does the Building and Personal Property COverage Form (BPP) cover?
    The BPP covers buildings, Your Business Personal Property, and Personal Property of Others.
  2. What, other than the building itself, does BPP Building coverage include?
    Your business and Personal Property also includes completed additionas, fixtures, and permanently installed machinery and equipment; personal property used to maintain or service the building or structure; and additions under construction, including materials, supplies, and temporary structures on or within 100 feet of the described premises.
  3. In addition to business personal property owned by the named insured, what else does Your Business Personal Property include?
    Labor, materials, or services furnished by the insured on personal property of others; the insured's use interest in improvements and betterments; and leased personal property that the insured has a contractual duty to insure.
  4. What types of businesses are most likely to buy Personal Property of Others coverage?
    Commercial bailees (businesses that take temporary possession of their customers' property) are most likely to buy Personal Property of Others coverage.
  5. What items that might otherwise be considered building property does the BPP exclude?
    The BPP excludes land; water; bridges; roadways, walks, patios, etc.; retaining walls that are not part of a building; bulkheads, pilings, piers, wharves, and docks; the cost of excavations, grading, back filling, or filling; and contraband. (Various exceptions allow coverage under some circumstances for some of the types of property listed above.)
  6. What general categories of personal property does the BPP exclude?
    Outdoor property of various kinds; money and securities and similar property; vehicles, watercraft, and aircraft; animals; property more specifically described in the same policy or another policy; airborne or waterborne property; and contraband. (Various exceptions allow coverage under some circumstances for some of the types of property listed above.)
  7. Summarize the coverage provided by the BPP for each of the following types of personal property.
    a. Vehicles or self-propelled machines
    b. Animals
    • a. The BPP covers unlicensed vehicles that the insured uses mainly on the insured's own premises, such as an unlicensed truck used to move goods around a yard. the BPP also covers vehicles that the insured manufactures, processes, or warehouses; and vehicles, other than autos, that the insured holds for sale.
    • b. Animals owned by the insured are excluded. however, the exclusion does not apply to animals held for sale (as when the insured is a pet store) or boarded by the insured.
  8. List the coverage limits for the following ADDITIONAL COVERAGES:
    a. Debris Removal
    b. Pollutant Cleanup Removal
    c. Preservation of Property
    d. Fire Department Service Charge
    e. Increased Cost of Construction
    f. Electronic Data
    • a. 25 percent of covered physical loss plus up to $10,000 in addition to policy limit.
    • 1b. $10,000 per policy year at each described premises.
    • c. No sublimit
    • d. $1,000
    • e. $10,000 or 5 percentof building limit, whichever is less
    • f. $2,500 per policy year
  9. Which "Additional Coverages" are in addition to the Policy Limit?
    • The additional $10,000 of Debris removal
    • Pollutant Cleanup and Removal
    • Fire Department Service Charge
    • Increased Cost of Construction
    • Electronic Data
  10. List the coverage limits for the following POLICY EXTENSIONS:
    a. Newly Acquired of Constructed Property
    1. Buildings
    2. Personal Property
    b. Personal Effects and Property of Others
    c. Valuable Papers and Records (Other than Electronic Data)
    d. Property Off Premises
    e. Outdoor Property
    f. Non-owned Detached Trailers
    • a. 1. $250,000
    • 2. $100,000
    • b. $2,500
    • c. $2,500 at each described premises unless a higher limit is shown in declarations
    • d. $10,000
    • e. $1,000 per occurrence; $250 per tree, shrub, or plant.
    • f. $5,000 (can be increased)
  11. Which POLICY EXTENSIONS are in addition to the policy Limit?
    All policy extensions are in additon to the policy limit.
  12. What is the amount of the limit that the BPP applies to outdoor signs?
    The 2007 edition of the BPP limits recovery for outdoor signs, whether or not they are attached to a building, to $2,500 per sign in any one occurrence.
  13. How is the deductible applied to a loss payment under the BPP?
    The insurer is not obligated to pay anything to the insured unless the loss exceeds the applicable deductible. The limit of insurance then applies to the adjusted amount of loss in excess of the deductible. That is, the deductible comes off the loss, not off the limit of insurance.
  14. What valuation basis applies to the following under a BPP?
    a. A building loss that will cost less than $2,500 to repair?
    a. Full cost of repair or replacement with no deduction for depreciation.
  15. What valuation basis applies to the following under a BPP?
    b. Loss of stock that has been sold but not delivered.
    b. Selling price less any discounts or unincurred expenses.
  16. What valuation basis applies to the following under a BPP?
    c. Breakage of a pane of glass that the local building code requires to be replaced with more expensive safety glazing material.
    c. Increased cost for the required safety glazing material.
  17. What valuation basis applies to the following under a BPP?
    d. Tenant's improvements and betterments if replaced by the insured tenant.
    d. Actual cash value (or replacement cost if that option applies)
  18. What valuation basis applies to the following under a BPP?
    e. Tenant's improvements and betterments if not replaced.
    e. A pro rata portion of the original cost of the improvements.
  19. What steps must the insured and insurer take to put the BPP's Agreed Value optional coverage into effect?
    The insured must submit a statement of values to the insurer, showing the full actual cash value (ACV) of the property (or its replacement cost, if that option applies). The insurer must consent to the agreed Value optional coverage.
  20. How does the Inflation Guard optional coverage address the problem of keeping property policy limits in pace with inflation?
    The inflation guard optional coverage automatically increasesthe limit(s) of insurance by the percentage of annual increase shown in the declarations.
  21. What property is not subject to replacement cost coverage under the BPP, even when the Replacement Cost optional coverage is in effect?
    • -Personal property of others
    • -Contents of a residence
    • -Works of art, antiques, or rare articles
    • -Stock, unless the "including stock" option is indicated in the declarations
  22. If an insured that has a BPP with the Replacement Cost optional coverage suffers a total loss of an insured building by a covered cause of loss, what is the most that the insurer will pay for this loss if the insured replaces the building at another location?
    The insurer will pay no more than what it would have cost to replace the building at the insured location, for the same occupancy and using materials of comparable quality. If the limit of insurance is lower than that cost, then the limit of insurance will be the largest amount payable by the insurer.
  23. Why could it be desirable for an insured to obtain the extension of replacement cost valuation to personal property of others?
    Replacement cost valuation on property of others can be desirable because agreements covering personal property of others in the possession of the insured may obligate the insured to insure the property on a replacement cost basis.
  24. High-Rise Company owns an apartment building. High-Rise insures its property under a BPP covering only the "building" (as defined in the BPP). Indicate whether each of the following items of property is covered under High-Rise Company's BPP.
    a. Equipment owned by High-Rise and used to clean and maintain the building.
    b. Furniture owned by High-Rise and located in several furnished aprtments in the building.
    c. Improvements and betterments made by a tenant.
    d. New plumbing fixtures owned by High-Rise and kept on the premises awaiting installation in the building.
    • a. Covered
    • b. Not covered
    • c. Covered
    • d. Covered
  25. Wilson Manufacturing Company insures its factory and business personal property under a BPP with the following limits, which satisfy the policy's 80 percent coinsurance requirement:
    Building $500,000
    Your Buisness Personal Property $800,000
    Wilson's proerty was damaged by a covered peril. Indicate how much, if anything, Wilson's BPP should pay for each of the following aspects of the loss. Ignore any deductible.
    a. Several underground pipes, valued at $5,000, were destroyed.
    a. -0-
  26. Wilson Manufacturing Company insures its factory and business personal property under a BPP with the following limits, which satisfy the policy's 80 percent coinsurance requirement:
    Building $500,000
    Your Buisness Personal Property $800,000
    Wilson's proerty was damaged by a covered peril. Indicate how much, if anything, Wilson's BPP should pay for each of the following aspects of the loss. Ignore any deductible.
    b. $1,300 cash was destroyed.
    b. -0-
  27. Wilson Manufacturing Company insures its factory and business personal property under a BPP with the following limits, which satisfy the policy's 80 percent coinsurance requirement:
    Building $500,000
    Your Buisness Personal Property $800,000
    Wilson's proerty was damaged by a covered peril. Indicate how much, if anything, Wilson's BPP should pay for each of the following aspects of the loss. Ignore any deductible.
    c. Wilson was required by local ordinance to pay a $500 service charge to the local fire department.
    c. $500
  28. Wilson Manufacturing Company insures its factory and business personal property under a BPP with the following limits, which satisfy the policy's 80 percent coinsurance requirement:
    Building $500,000
    Your Buisness Personal Property $800,000
    Wilson's proerty was damaged by a covered peril. Indicate how much, if anything, Wilson's BPP should pay for each of the following aspects of the loss. Ignore any deductible.
    d. Plans and blueprints owned by Wilson were destroyed. The cost of research to replace these valuable papers was $6,000.
    d. $2,500 under the extension for valuable papers or records
  29. Wilson Manufacturing Company insures its factory and business personal property under a BPP with the following limits, which satisfy the policy's 80 percent coinsurance requirement:
    Building $500,000
    Your Buisness Personal Property $800,000
    Wilson's proerty was damaged by a covered peril. Indicate how much, if anything, Wilson's BPP should pay for each of the following aspects of the loss. Ignore any deductible.
    e. Patterns owned by a customers of Wilson's were destroyed. Their actual cash value was $5,000.
    e. $2,500 under the extension for property of others
  30. D&D Paint Company owns and operates a retail paint store insured under a BPP. Suppose a fire or another covered peril damages the store and causes many cans of paint, solvents, and other chemicals from the inventory to release their contents. D&D would like to know the answers to these questions:
    a. Will the BPP cover the cost of cleaning up pollutants within the building? If so, what limit will apply?
    A. Yes, as debris removal. twenty-five percent of (a) the insurer's payment for physical loss and (b) the applicable deductible; plus, if needed, an additional $10,000.
  31. D&D Paint Company owns and operates a retail paint store insured under a BPP. Suppose a fire or another covered peril damages the store and causes many cans of paint, solvents, and other chemicals from the inventory to release their contents. D&D would like to know the answers to these questions:
    b. Will the BPP cover the cost of cleaning up any pollutants from the land surrounding the building? If so, what limit will apply?
    b. Yes, as pollutant cleanup and removal. $10,000.
  32. A tenant in BGA's building insures its personal property and its use interestin improvements and betterments under a BPP. A fire in the tenant's premises destroyed the tenant's business personal property as well as the improvements and betterments that had been installed by the tenant when it first occupied the building. Because the tenant's five-year lease had only one year remaining at the time of the loss, the tenant decided not to replace the improvements and betterments. If the original cost of the improvements and betterments was $100,000, how much, if anything, would the tenant be able to recover for the improvements and betterments under its BPP? (Ignore deductibles.)
    (1 year remaining/5 year lease period) x $100,000 = $20,000
  33. An office building that is leased to tenants is insured under a BPP on a replacement cost basis for a limit of $1,400,000 with 80 percent coninsurance and a $1,000 deductible. The building is damaged by a covered peril. Immediately before the loss occurred, the building's actual cash value was $1,600,000, and its replacement cost was $2,000,000. If the building owner has the building repaired at a cost of $800,000, how much will the insurer pay if the insured elects to recover on a replacement cost basis?
    [($140,000/(.80 x $200,000)) x $800,000] - $1,000 = $699,000
  34. CAB Corporation is the named insured under a BPP providing replacement cost coverage on its building. the building has been destroyed by a covered peril, and CAB is evaluating its options.
    a. If CAB decides not to rebuild the building, how will its claim be settled?
    a. The insurer will pay only the actual cash value of the property.
  35. CAB Corporation is the named insured under a BPP providing replacement cost coverage on its building. the building has been destroyed by a covered peril, and CAB is evaluating its options.
    b. If CAB decides to rebuild, what factors determine the amount CAB will recover?
    b. The limit of insurance, the cost to replace the property on the same premises with comparable property, and the amount actually spent to repair the property - whichever is smallest.
  36. CAB Corporation is the named insured under a BPP providing replacement cost coverage on its building. the building has been destroyed by a covered peril, and CAB is evaluating its options.
    c. If CAB decides to rebuild at some other location, would the insurer pay the cost of building a similar building on another piece of land CAB owns?
    c. Yes, but for no more than the smallest of the amounts listed in b (previous).
  37. CAB Corporation is the named insured under a BPP providing replacement cost coverage on its building. the building has been destroyed by a covered peril, and CAB is evaluating its options.
    d. How soon does CAB need to decide what it will do?
    d. If CAB wants to replace the building , it should do so "as soon as reasonably possible after the loss." The insured then must make a claim for replacement cost coverage within 180 after the loss.

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