Commercial Insurance Chapter 2
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Proof of loss
a statement of facts about a loss for which the insured is making a claim
Actual cash value (ACV)
cost to replace property with new property of like kind and quality less depreciation
Agreed Value optional coverage
optional coverage that suspends the Coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and insured
Inflation Guard optional coverage
coverage for the effects if inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations
Replacement Cost optional coverage
coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis
- the process by which an insurer can after it has paid a loss under the policy, recover the amount paid from any other party (other than the insured) who caused the loss or is otherwise legally liable for the loss
a property outside the area owned or controlled by the insured that increases the probability of loss to the insureds building and its contents
Explain how each of the Loss Conditions and Additional Conditions affects coverage under the Building and Personal Property Coverage Form.
The BPP requires both the insurer and the insured to perform certain duties and follow certain procedures in connection with any claim made under the BPP. The Loss Conditions stipulates the duties of the insured and the insurer after a loss has occurred and establishes procedures for adjusting claims and it also explains the methods of establishing the value of the damaged property. The Additional Conditions of the BPP deal with coinsurance and the interests of the mortgagee. The Abandonment condition prohibits the insured from abandoning damaged property to the insurer for repair or disposal. The appraisal condition establishes a method for the insurer and the insured to resolve disputes about the insured property’s value of amount of loss. There are four ways that the insurer can pay for a covered loss or damage. If the insurer or insured recovers property that was reported stolen, the one that recovered the property is obligated to promptly notify the other. If a building is vacant for more than 60 consecutive days, then the insurer will not cover the loss.
Explain how each of the following optional coverages described in the BPP modifies the basic coverage of the BPP:
a. Agreed Value
b. Inflation Guard
c. Replacement Cost
d. Extension of Replacement Cost to Personal Property of Others
The agreed value option enables the insured to remove the uncertainty as to whether the amount of insurance carried complies with the coinsurance condition. The inflation guard option automatically increases the limit of insurance by the percentage of annual increase shown in declarations page. The replacement cost option replaces “actual cash value” with “replacement cost” in the BPP. The extension of replacement cost to personal property of others option forces the insured responsible for the replacement cost of items that it allows to be leased in the event that they are damaged.
Summarize each of the Commercial Property Conditions.
- The concealment,
- misrepresentation, or fraud part is void if the insured commits any fraudulent
- act related to the coverage. The control of property consists of two parts that
- explain that losses may be covered if the damage or loss was not committed by
- the insured or with the insured’s knowledge. The insurance under two or more
- coverages is necessary because some property might be covered fewer than two or
- more parts in a commercial property coverage package. The legal action against
- us lists the actions that must be done required before the insured can sue the
- insurer. The liberalization, if the insurer broadens any coverage then the
- changes automatically extends to all policies in effect. The transfer of rights
- or recovery against others to us permits the insured to waiver their rights to
- recovery against any other party. The no benefit to bailee is intended to
- defeat provisions in the bailment contract and to reinforce the insurer’s right
- of subrogation against the bailee. The policy period, coverage territory
- condition states that coverage begins of the effective date and ends on the
- expiration date shown in the declarations.
Explain how each of the conditions contained in the Common Policy Conditions affects coverage under a commercial property coverage part.
The cancellation states that the insured may cancel the policy at any time with written notice and if there are two or more insureds on the policy, only the first named insured may cancel the policy. The changes condition states that the policy constitutes the entire contract between the insurer and the named insured and the policy can be changed only by a written endorsement issued by the insurer. The examination of books and records condition allows the insurer to reserve the right to examine and audit the insured’s books and records related to the policy at any time during the policy period and for up to three years after the termination of the policy. The inspections and surveys condition allows the insurer the right, but not the obligation to inspect the insured’s premises and operations at any time during the policy period. The premiums conditions state that the first named insured is responsible to pay the premium. The transfer of rights and duties under this policy condition states that insured cannot transfer any rights or duties under the policy to any other person or organization without the insurer’s written consent.
Explain how each of these documents modifies the Building and Personal Property Coverage Form:
a.Ordinance or Law Coverage endorsement
b.Spoilage Coverage endorsement
c.Flood Coverage endorsement
d.Earthquake and Volcanic Eruption Coverage endorsement
e.Peak Season Limit of Insurance endorsement
f.Value Reporting Form
The ordinance or law coverage endorsement has three coverages for losses resulting from the enforcement of building ordinances or laws. The spoilage coverage endorsement covers damage to perishable stock due to power outages, breakdowns of cooling or heating equipment. The flood coverage endorsement provides insurance for buildings and their contents in two ways. The earthquake and volcanic eruption coverage endorsement extends coverage to earthquake and volcanic eruptions under two endorsements, one that covers the full policy limit (contains coinsurance) and the other is lower than the regular policy limit (contains no coinsurance). The peak season limit of insurance endorsement covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time frames. The value reporting endorsement modifies the amount of insurance.
Identify the factors that affect commercial property insurance premiums.
The factors that affect commercial property insurance premiums are the limit of insurance, the causes of loss covered, the applicable coinsurance percentage, deductible amounts, the inclusion of optional coverages, and the building’s construction, occupancy, protection, external exposure, and location.
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