C12 Property Insurance - Ch 6 - The Commercial Property Named Perils Form

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charisse
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312240
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C12 Property Insurance - Ch 6 - The Commercial Property Named Perils Form
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2015-11-30 13:54:58
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Ch6 - Property Insurance C12
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  1. What are the 2 versions of IBC's Commercial Property Form?
    • 1) Named Perils form
    • 2) Broad form (written on an all risks basis)
  2. Where more than one deductible applies for any one premises, which deductible will apply?
    The clause provides that only the highest deductible will apply.
  3. Describe the requirements of the Coinsurance clause.
    It requires the insured to maintain insurance at least equal to the specified coinsurance % of the value of the property as determined in the Basis of Valuation clause.
  4. How does the Vacancy or Unoccupancy exclusion in the Basic Fire Policy differ from that in the Commercial Property Named Perils form?
    This exclusion slightly differs from its counterpart in the Basic Fire Policy in its use of the word are instead of while to describe the excluded condition.
  5. Describe the Property Illegally Acquired or Kept exclusion.
    If an insd steals property or buys it from someone who stole it, the insured has no legal claim to it - and so no claim to indemnity for its loss. Subject to teh Criminal Code. Unless the insured is convicted of an offence, the insurer cannot prove that the possession is illegal.
  6. What has been omitted from the War Risks exclusion in the Commercial Property Named Perils Form?
    Riot and Civil Commotion have been omitted. Riot is one of the insured perils.
  7. Define the terms hackers and viruses as they pertain to technology.
    Hackers use the inherent features of many computer systems and software applications to interfere with, steal, or corrupt data; disrupt communications; or otherwise wreak havoc on businesses and individuals who depend on their systems and the Internet

    Viruses use the Internet to surreptiously enter a computer system and destroy or corrupt data, disable the system, use the system to distribute itself to other systems, or an combination of these actions
  8. What are the exceptions to the exclusion of loss due to a data problem?
    The Commercial Property Named Perils form excludes data. It also excludes loss or damage caused directly or indirectly by a data problem

    The exclusion of loss due to a data problem does not apply to loss or damage caused directly by resultant fire, explosion, smoke, or leakage from fire protectant equipment
  9. How is the Fungi and Spores exclusion similar to the Pollution exclusion?
    Lawsuits have proliferated for property damage and especially physical or mental illness attributed to mould/pollution.
  10. How does the Debris Removal extension address the gap when the amount of insurance has been exhausted but the cost of removing debris remains?
    • In the IBC form, the amount payable under the Debris Removal extension shall not exceed 25% of the sum of:
    • 1) the total amount payable for the direct loss or damage to insured property, and
    • 2) the amount of the applicable deductible
  11. Why does the form specifiy a % of the direct loss amount rather than including a debris removal expense?
    Anticipating debris removal expense is difficult. The expense depends on the direct loss, yet a major loss might leave less debris than a minor one. By making the amount of debris removal expense a fixed % of the amount of direct loss, the formula in the Commercial Property Named Perils form is an improvement on the Basic Fire Policy.
  12. What are the limitations to the coverage of officers' and employees' personal property?
    In some jobs, an employee personally owns the tools or special equipment they use. This extension allows conditional coverage for such property. It applies only to loss or damage occurring at the insured premises. And coverage does not apply to property insured by its owner.
  13. Describe the consequences of a material change in risk within the control and knowledge of the insured as they relate to breach of contract.
    The Breach of Condition clause softens the impact on the insured of a non-disclosed material change. If the breach was not responsible for a loss or it occurred in a part of the premises the insd did not control then the policy is maintained (instead of voided).
  14. How is the Property Protection Systems clause linked to the Breach of Condition clause?
    • Property Protection Systems clause requires insd to advise insr of: 
    • - any impairment of system
    • - cancellation/non-renewal of system
    • - suspension of police service in response to system

    In the Commercial Property Named Perils form the Property Protection Systems clause is explicitly linked to the Breach of Condition clause. Any failure of the insured to comply with the Property Protection Systems clause will be a breach of policy.
  15. What are the benefits of the form's approach to premium adjustment? What are the drawbacks for the insured?
    • Benefits:
    • - not having to file reports throughout the policy period saves handling costs by the insured, the insurer and broker
    • - insured can choose to apply for a premium adjustment after the end of some years but not others

    • Drawbacks:
    • - insured is required to pay advance premium based on the full amount of insurance - no discount
    • - the drawback is balanced by the chance, with premium adjustment, to recover up to half of the advance premium
  16. Describe the Basis of Valuation clause.
    - establishes a clear understanding of how value will be determined for various types of property, including sold and unsold stock, property of others, tenants improvements, business records, and other insured property.

    • - Unsold stock: value is its ACV 
    • - Sold stock: value is simply its selling price
  17. Define tenant's improvements
    • - additions or changes a tenant makes, with the landlord's permission, to the structure or surrounding property for the needs of the business
    • - ie. shelves, storage for unsold stock, display fixtures, better lighting, heating/cooling equipment, partition walls, floor/ceiling finishes
    • - such work done at tenants expense 
    • - in exchange for permission the landlord may require that the improvements remain at the end of the lease or that they be removed and the building restored to its original condition
  18. Describe the limitation of the insurer's liability for business records.
    • - including records on electronic media are valued at the cost of restoring them
    • - regardless of the medium, liability is limited to the cost incurred by the insured to re-create the damaged or destroyed records from duplicates, where duplicates exist
    • - the cost of re-assembling data is not covered
  19. Name 3 factors considered in the form to determine ACV.
    • 1) replacement cost
    • 2) less any depreciation
    • 3) market value

    Depreciation considerations: condition of the property before damage, the resale value, the normal life expectancy of the property, and obsolescence
  20. Explain what it means to say a structure must be fixed.
    Whatever the type of structure, it must be fixed, which implies it is somehow attached to the ground or to something else attached to the ground. It must also be located on the premises described in the Declarations Page.
  21. Describe the 3 different kinds of equipment broadly identified in the form.
    1) The broad array of contents any business is likely to have: furniture, fittings, fixtures, machinery, tools, appliances

    2) Property like the first type but belonging to others: furniture or machinery under lease

    3) Tenants improvements
  22. Define pollutants
    - includes solid, liquid, gaseous, or thermal irritants or contaminants in any form
  23. In commercial wordings, why might vehicles be included in the definition of premises?
    • - in the commercial wordings, the definition of premises is extended to vehicles within 100 metres of the insd premises
    • - purpose is to cover goods being delivered
  24. Define terrorism
    • - exclusion
    • - an ideologically motivated unlawful act or acts, including but not limited to the use of violence or force or threat of violence or force, committed by or on behalf of any group, organization, or government for the purpose of influencing and/or instilling fear in the public or a section of the public
  25. MC: The property insured under the Commercial Broad Perils form includes one or more of which of the following 5 items?
    ...All property, building, contents, equipment and stock

    The property insured under the form includes one or more of 5 items: building, equipment, stock, contents, and all property
  26. Under the Deductible clause, where more than one deductible applies for any one premises in any one occurrence...
    ...only the highest deductible applies

    Where more than one deductible applies for any one premises in any one occurrence, the clause provides that only the highest deductible will apply
  27. Under the Basis of Valuation clause, the value of unsold stock is its...
    ...ACV at the time and place of loss

    The value of unsold stock is its ACV at the time and place of loss as stated in the Basis of Valuation clause
  28. Which of the following is considered a cash card as defined in the Commercial Property Named Perils Form?
    ...Gift card

    Gift card, as the term cash card refers to cards designed to store cash value by electronic means as a mode of payment, without a personal identification number or direct access to a bank or other account
  29. In commercial wordings, such as the Commercial Property Named Perils Form, the definition of Premises is extended to vehicles within...
    ...100 metres of the insured premises
  30. SA(10): Explain the following exclusions under the Commercial Property Named Perils Form:
    - Data Exclusion
    • Data Exclusion
    • - among the more serious problems for insurers posed by the growth of the internet are hackers and viruses
    • - Hackers use the inherent features of many computer systems and software app's to interfere with, steal or corrupt data; disrupt  communications; or otherwise wreak havoc on businesses and individuals who depend on their systems and internet
    • - Viruses use the internet to enter a computer system and destroy or corrupt data, disable the system, use the system to distribute itself to other systems, or any combination of these actions
    • - Hackers can be just a nuisance, but where the security of a system is breached, the consequences can be serious and costly to fix
    • - Viruses are often the malicious work of hackers, though they may be innocently created and spread by user error - costly to fix
    • - The heart of the problem is data - data for financial transactions, business plans, product development, data for software, data printed or on screen, in code, numerical or alpha, tables/text
    • - The Commercial Property Named Perils Form excludes data
    • - It excludes loss or damage caused directly
    • -- or indirectly by a data problem
    • - The terms data and data problem are defined in the Definitions section of the form
    • - The exclusion of loss due to data problem does not apply to loss or damage caused directly by resultant fire
    • -- explosion
    • -- smoke
    • --or leakage from fire protective equip
  31. SA(10): Explain the following exclusions under the Commercial Property Named Perils Form:
    - Terrorism Exclusion
    • Terrorism Exclusion
    • - The Commercial Property Named Perils Form excludes loss or damage caused directly,
    • -- or indirectly, in whole or in part, by terrorism as defined or by any activity
    • -- or decision of a government agency
    • -- or other entity to prevent,
    • -- respond to,
    • -- or terminate terrorism
    • - The exclusion applies whether or not other causes or events (whether covered or not) contribute concurrently
    • -- or in sequence to loss arising out of terrorism
    • - The exclusion also provides that, if any part of it is found to be invalid,
    • -- unenforceable,
    • -- or contrary to statute, the rest of it will still remain in force
  32. SA(10): Explain the following exclusions under the Commercial Property Named Perils Form:
    - Fungi and Spores Exclusion
    • Fungi and Spores Exclusion
    • - The Commercial Property Named Perils Form excludes loss and related expenses wholly
    • -- or partly,
    • -- and directly,
    • -- or indirectly, due to fungi
    • -- or spores
    • - The word mould does not appear in the exclusion, but mould is included in the definition of fungi
    • - The similarity of some mould damage to pollution damage makes this exclusion similar to the Pollution Exclusion
    • - It anticipates not only direct
    • -- and indirect loss, but also multiple causes of loss, including the possibilities that fungi or spores in themselves constitute damage
    • -- and that damage from fungi or spores may be inevitable with loss by an insured peril
    • - The costs or expenses incurred in testing for 
    • -- or monitoring fungi or spores are excluded, as the Pollution Exclusion excludes testing for or monitoring pollutants
  33. SA(15): Define and describe the 3 different kinds of equipment under the Commercial Property Named Perils Form.
    • Equipment
    • - The first type of equipment includes the broad array of contents any business is likely to have: furniture,
    • -- furnishings
    • -- fittings,
    • -- fixtures,
    • -- machinery,
    • -- tools, 
    • -- utensils,
    • -- and appliances
    • - But this array of contents is broad enough to unintentionally include property that could also fall within the definitions of building or stock
    • - The second type of equipment includes property like the first type but belonging to others and which the insured is obligated to insure
    • -- or for which the insured is legally liable
    • - An insured may have obligations under a labour agreement concerning employees clothing or tools or both
    • - The third type of equipment comprises tenant's improvments
    • - Tenant's improvements could include property that, except for the ownership, is similar to property defined under building or equipment
    • - Such items could be treated as a separate item in the property described on the Declarations Page,
    • -- but it is usually simpler to include them under equipment - the same rate is usually applied to both types of property
  34. LA(30): You are a commercial lines broker, and you have received the following inquiries from some clients.  

    Explain why you would recommend the Commercial Property Named Perils Form to each of these clients.
  35. LA(10): Leo, owner of a manufacturing company is frustrated with the time and cost to continually report stock values under the policy he has with his current insurer.  Leo would like to know if there is an alternative policy or form that does not involve completing these reports throughout the policy period.
    • Premium Adjustment
    • - The Commercial Property Named Perils Form will allow Leo to file a summary of month-end stock values after the policy has expired
    • - The actual premium for each location will be calculated on the average of the declared monthly values
    • - The insurer will refund any excess of premium paid by the insured (Leo) over the calculated actual premium
    • -- up to 50% of the premium paid
    • - Any excess of declared montly values over the amount of insurance will not be included in the premium adjustment
    • - One benefit of this approach is not having to file reports throughout the policy period, which saves handling costs by the insured (Leo),
    • -- the insurer,
    • -- and the insurance broker/agent
    • - Another benefit is that the insured (Leo) can choose to apply for a premium adjustment after the end of some years but not others
  36. LA(10): James, a new client, left his last insurance company as he was disgruntled that he had to pay an extra $10,000 to remove the wreckage from one of his warehouses that was damaged in a fire. James's policy did not have enough insurance available to cover the cost of debris removal after the loss was paid.
    • Debris Removal Extension
    • - Debris removal
    • -- and removal of Windstorm debris are 2 parts of a single extension of coverage
    • - That single extension complements the Removal extension,
    • -- but it is distinct from it
    • - The 1st of the 2 parts, Debris Removal, indemnifies the insured (James) for the cost of removing debris of insured property that results from damage caused by an insured peril
    • - In the IBC form, the amount payable under the Debris Removal extension shall not exceed 25% of the sum of
    • -- the total amount payable for the direct loss or damage to insured property and
    • -- the amount of the applicable deductible
    • - The 2nd part of the formula - the amount of the deductible - is added to be fair to the insured (James)
    • - By adding the deductible to the amount payable for the direct loss, the formula relates the amount of debris removal expense to something that directly influences it,
    • -- the amount of the loss itself,
    • -- rather than to something that only indirectly influences it (the amount payable after the deductible has been applied)
    • - Anticipating debris removal expense is difficult
    • - The expense depends on the direct loss, yet a major loss might leave less debris than a minor one
    • - By making the amount of debris removal expense a fixed % of the amount of direct loss, the formula in the Commercial Property Named Perils form is an improvement on the Basic Fire Policy
    • - The formula allows the insurer to anticipate its loss exposure,
    • -- including debris removal costs, 
    • -- and ensure some money for the insured to cover this indirect cost
  37. LA(5): Horatio, owner of a manufacturing company, calls to inform you that his company will now be maintaining more than one gallon of gasoline on premises, which will be used to fuel production machinery. Horatio asks what policy or form will allow him to keep the hazardous material on site.
    • Permission
    • - You could recommend to Horatio a Commercial Property Named Perils form, which has a Permission Clause
    • - A Permission clause grants permission to the insured (Horatio) for other insurance concurrent with the form; to make additions,
    • -- alterations,
    • -- or repairs,
    • -- and to do work and keep items usual or necessary to the insured's business
    • - The Permission clause thus refers to potentially hazardous items that may be normally present on Horatio's premises
    • - Some of them might give off flammable vapours
    • -- and be present in quantities greater than one gallon
    • - But the Permission clause makes clear the insurer's awareness of such items
    • -- and that the insurer is content to bear the risk
  38. LA(5): Kathy, an office manager, calls you because her company wants to insure the personal items that her employees may bring with them to work.
    • Personal Property of Officers and Employees
    • - The Commercial Property Named Perils Form allows Kathy an option to extend the definition of equipment to include personal property of officers, 
    • -- and employees
    • - This extension allows conditional coverage for personal property
    • - It applies only to loss or damage occurring at the insured's (Kathy's) premises
    • -- and coverage does not apply to property insured by its owner
    • - But if the insured (Kathy) is required to insure such property - perhaps by a collective bargaining agreement - or has some other legal liability for loss to the property,
    • -- then the fact that the owner has insurance does not preclude he insured (Kathy) from exercising the option

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