FOI - Chapter 7

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Questions and Answers

What type of property is considered commercial property?

Any residential property owned by an individual

Any property used exclusively for personal activities

Any property owned or used in conjunction with a business (correct)

Only the stock and inventory of a business

Which of the following is NOT one of the eight perils covered by the Named Perils Form?

Riot

Smoke due to faulty operation of a stationary furnace

Impact by land vehicle

Earthquake damage (correct)

Which of the following is a coverage advantage of the Broad Form (IBC 4037)?

Covers illegal activities performed by employees

Covers all types of flooding damage

Insures against vehicle impact damage regardless of fault (correct)

Includes damage caused by agricultural smudging

What types of water damage are excluded from the Broad Form coverage?

Damage due to sewer backup Signup and view all the answers

What does the Broad Form cover in relation to theft?

All types of theft regardless of source Signup and view all the answers

Which of the following perils is explicitly excluded from the Broad Form coverage?

Cost to repair faulty workmanship Signup and view all the answers

Which coverage limits the smoke damage coverage under the Broad Form?

Smoke damage caused by agricultural smudging Signup and view all the answers

Why are premiums typically higher for the Broad Form compared to other forms?

It provides broader coverage options for more risks Signup and view all the answers

What is the primary function of Business Interruption Insurance?

To restore lost income after a property loss Signup and view all the answers

Business Interruption Insurance typically does NOT cover losses arising from which of the following?

Perils not insured by the property's insurance policy Signup and view all the answers

When does coverage for Business Interruption Insurance generally begin?

On the day of loss to property Signup and view all the answers

Which expenses may be covered by Business Interruption Insurance to reduce the overall loss?

Renting a temporary location during repairs Signup and view all the answers

The coverage period for Business Interruption Insurance usually lasts for how long?

Up to 12 months after the loss Signup and view all the answers

What is one condition for receiving benefits from Business Interruption Insurance?

The covered peril must have caused actual damage Signup and view all the answers

Under what circumstance would a business still receive benefits from Business Interruption Insurance?

If local authorities restrict access without physical damage Signup and view all the answers

What does the Earnings Form in Business Interruption Insurance cover?

Coverage stops when property is repaired or replaced Signup and view all the answers

Which of the following items are included in the definition of a building?

Metal perimeter fencing Signup and view all the answers

What is considered when adding value to the insurance for extensions to a building?

Value of attached lean-tos or additions Signup and view all the answers

Which of the following is NOT included in the definition of building materials?

Finished furniture Signup and view all the answers

What does the definition of stock encompass?

Merchandise typical of the insured’s business Signup and view all the answers

Which materials are specifically excluded from the stock definition?

Non-business related items Signup and view all the answers

What must be considered when selecting an insurance limit for items included in the definition of building?

The value of all items falling within the definition of building Signup and view all the answers

Which item would be covered under stock insurance?

Merchandise intended for sale Signup and view all the answers

Who is legally responsible for damage caused by employees to the property of others?

The employer Signup and view all the answers

What triggers the stop of income coverage in the profits form?

When the income reaches the level it would have been without the loss Signup and view all the answers

Which of the following is true regarding Extra Expense Insurance Endorsement Form (IBC 4027)?

It is designed for businesses needing to resume operations quickly. Signup and view all the answers

What type of expenses does the Extra Expense Insurance cover?

Only the extra costs incurred over normal expenses Signup and view all the answers

In what situation is the profits form of insurance recommended?

When there is potential for customers to change their buying patterns Signup and view all the answers

Which statement accurately differentiates Extra Expense Insurance from expenses to reduce loss coverage?

Extra Expense Insurance covers expenses regardless of loss reduction evidence. Signup and view all the answers

What is NOT covered under Builder's Risk - Broad Form (IBC 4042)?

Costs to repair faulty workmanship Signup and view all the answers

When does coverage under the Builder's Risk policy stop?

When there are no alterations for 30 consecutive days Signup and view all the answers

What amount must the insured purchase for Builder's Risk insurance?

The insurance amount equivalent to the project's completed value Signup and view all the answers

Which equipment can be covered under a Contractor’s Equipment Floater?

Heavy machinery owned by contractors Signup and view all the answers

Under the Installation Floater, when is property insured?

During installation until it is rejected or accepted Signup and view all the answers

Which of these is included in the coverage of Builder’s Risk - Broad Form?

Scaffolding used on the project Signup and view all the answers

What type of coverage does the Contractor’s Equipment Floater provide?

Insurance for moveable construction equipment Signup and view all the answers

Which factor does NOT affect the insurance limits during construction?

The initial cost of materials Signup and view all the answers

What is the primary responsibility of occupiers regarding the safety of their property?

Maintain the property to prevent harmful escapes. Signup and view all the answers

Under what condition is a landlord not liable for injuries or damages caused by rented premises?

When the landlord has concealed adverse conditions. Signup and view all the answers

In which scenario can a landlord be held responsible for damage caused to a tenant's property?

When they fail to maintain premises after reasonable notice. Signup and view all the answers

What kind of items can make an occupier strictly liable for injuries caused to others?

Dangerous substances brought onto the property. Signup and view all the answers

What is presupposed about the condition of furnished rented premises at the outset of tenancy?

That they are fit for the purpose leased. Signup and view all the answers

Which part of a property is a landlord responsible for maintaining when there are multiple tenancies?

Common areas like stairways and lobbies. Signup and view all the answers

What must landlords do to be held liable for injuries caused by conditions on the rented premises?

Contract for maintenance and fail to perform after notice. Signup and view all the answers

Which of the following describes the strict liability of occupiers regarding dangerous items?

They are liable if the item escapes and causes injury. Signup and view all the answers

What is the primary goal of civil law?

To seek compensation for financial loss or damage Signup and view all the answers

What distinguishes criminal law from civil law?

Criminal law involves punishment for wrongdoings Signup and view all the answers

In which legal system are laws derived from bills introduced into government bodies?

Statute law Signup and view all the answers

What does the doctrine of precedence in common law establish?

Current court decisions should follow previous ones in similar circumstances Signup and view all the answers

How does statute law interact with common law?

Statute law overrides common law when passed Signup and view all the answers

What is one characteristic of criminal law?

Relies on fines and imprisonment as penalties Signup and view all the answers

Which of the following statements is true about the age of majority in Canada?

Most provinces lower the age to 18 or 19 Signup and view all the answers

Which of the following is NOT a characteristic of civil law?

Always resolved through criminal courts Signup and view all the answers

What defines a trespasser on someone's premises?

Someone who enters without permission of the occupier Signup and view all the answers

What duty does an occupier owe to a licensee on their premises?

They must protect the licensee from known concealed traps and dangers Signup and view all the answers

Who qualifies as an invitee on someone else's land?

A person who enters by invitation related to the owner's business interests Signup and view all the answers

In which of the following situations would a person be classified as a licensee?

A friend attending a party at someone’s house Signup and view all the answers

Which of the following is true about the duties owed by an occupier to a trespasser?

Occupiers cannot intentionally harm or set traps for trespassers Signup and view all the answers

What is NOT a requirement for a person to be considered an invitee?

They must have a financial interest in the activity at hand Signup and view all the answers

Which group of individuals is typically NOT categorized as licensees in certain provinces?

Commercial delivery personnel like couriers Signup and view all the answers

What distinguishes a licensee from a trespasser?

A licensee has consent to be on the premises Signup and view all the answers

Under what circumstance can an employer be held liable for employee injuries even if workers' compensation applies?

When the injury is related to an occupation not covered by the Workers' Compensation Plan Signup and view all the answers

What must be demonstrated for occupiers of property to avoid liability for an independent contractor's negligence?

They must show that reasonable care was taken in the selection of the contractor Signup and view all the answers

What happens to employees' rights when they accept no fault insurance benefits under Workers' Compensation?

They give up the right to sue the employer for work-related injuries Signup and view all the answers

What is one circumstance in which employers may have liability despite the existence of Workers' Compensation coverage?

If the injury results from a trade or occupation not covered by the Workers' Compensation Plan Signup and view all the answers

In what situation can an employee be considered to be 'on a frolic of their own'?

When they use employer property solely for personal matters without permission Signup and view all the answers

Which of the following describes the potential responsibility of occupiers of property regarding independent contractors?

Occupiers cannot be liable if they showed reasonable care in selecting the contractors Signup and view all the answers

What type of arrangement is usually necessary for employers to cover risks associated with occupations not under Workers' Compensation?

An Employer’s Liability Rider Signup and view all the answers

When can employers delegate their liability to independent contractors?

When it can be shown that reasonable care was taken in selecting the contractor Signup and view all the answers

What legal duty does an occupier owe to invitees in relation to the safety of premises?

To correct deficiencies that may harm the invitee Signup and view all the answers

In which provinces are the common law terms for licensee and invitee replaced by the classification of 'visitors'?

BC, AB, ONT, NS Signup and view all the answers

What is the primary consideration of a legal duty owed to children on premises?

Children lack mature judgment and must be protected Signup and view all the answers

Which of the following best describes the term 'attractive nuisance' in relation to children's safety?

A term for distractions that entice children onto the property Signup and view all the answers

What is the primary aim of the Occupiers Liability Act regarding visitors?

To establish a common duty to ensure visitors' safety Signup and view all the answers

What constitutes a visitor under the definition given in the context?

Anyone entering premises other than a trespasser Signup and view all the answers

What type of individuals can also be affected by the conditions of the occupier's premises, according to the content?

Neighbours and passers-by Signup and view all the answers

According to common law, what special consideration is given to children regarding property safety?

Children require additional safeguards due to their impulsiveness Signup and view all the answers

Study Notes

Business Interruption Insurance Overview

Commercial property insurance covers direct damage to buildings, stock, and equipment only.
Large property losses can lead to business closure and income reduction.
Partial operations may continue at the insured or alternate locations.

Purpose of Business Interruption Insurance

Functions as a contract of indemnity to restore lost income after a covered loss.
Provides coverage for ongoing expenses such as salaries, taxes, and mortgage payments.
Insures against perils listed in the commercial property policy.
No coverage exists for interruptions caused by perils not covered in the property policy, unless local authorities restrict access.

Coverage Duration and Expenses

Coverage begins on the day of property loss and may extend for up to 12 months.
Payments continue beyond the expiration of the commercial property insurance if needed.
Insured expenses incurred to reduce loss (e.g., temporary relocation) are covered if they indeed decrease the total loss.

Types of Business Interruption Insurance

Earnings Form: Coverage starts at the time of loss until the property is repaired or replaced.
Profits Form: Coverage continues until the business income is restored to the expected level, critical for businesses with customer retention concerns.

Common Insurance Forms

Named Perils Form: Covers specific perils including fire, explosion, vandalism, and windstorm.
Broad Form (IBC 4037): Insures against all risks of direct physical loss/damage subject to exclusions.
Higher premiums are associated with Broad Form policies due to wider coverage.

Detailed Definitions

Commercial Property: Includes all property used in business operations, such as buildings, stock, and equipment.
Definition of Stock: Covers all merchandise typical to a business and items for packaging/advertising.

Specific Policy Features

Builder's Risk - Broad Form (IBC 4042): Covers property under construction; excludes contractor tools and certain damage costs.
Policies must reflect the construction’s completed value to avoid fluctuations in insurance amounts.

Additional Insurance Options

Contractor’s Equipment Floater: Covers movable equipment owned or rented by contractors.
Installation Floater: Protects property during transit to installation sites and throughout installation until accepted.

Extra Expense Insurance Endorsement (IBC 4027)

Covers necessary extra expenses for continuing operations post-interruption.
Limited to costs above normal operational expenses, without needing to prove loss mitigation.

Key Considerations

Ensure the chosen limit of insurance covers all definitions and business needs.
Understanding exclusions, such as flood or sewer backups, is critical for comprehensive coverage.

Property Ownership and Legal Responsibilities

Occupiers have a legal duty to protect invitees from known dangers and those that can be reasonably discovered, ensuring safety on the premises.
Common examples of hazards include loose handrails, protruding nails, and unsecured ceiling fixtures.
In certain provinces (BC, AB, ONT, NS), statutory laws redefine invitees as “visitors” under Occupiers’ Liability Acts, emphasizing a broad duty of care towards all visitors.
A visitor is defined as anyone entering premises other than trespassers, altering traditional common law understanding.

Duties towards Children

Common law acknowledges that children lack mature judgment; thus, occupiers must protect them from risks, labeling hazardous properties as "attractive nuisances."
Occupiers are legally required to maintain a safe environment free from dangers for children.

Responsibilities towards Neighbors and Passers-by

Occupiers are liable for injuries to neighbors and passers-by caused by their property conditions or activities.
Responsibilities include maintaining premises to prevent harmful substances (water, sewage) from escaping that might endanger others.
If occupiers introduce dangerous materials onto their property, they are strictly liable for any injuries caused by their escape.

Landlord Liability

Landlords are generally not responsible for damage or injuries caused by rented premises unless they have explicitly warranted the premises' safety or concealed known dangers.
Exceptions exist for furnished rentals, where safety is presumed at the start of tenancy, and in cases where landlords fail to fulfill maintenance obligations after reasonable notice.

Civil Law Overview

Civil law resolves disputes between individuals and entities, distinct from criminal law, which addresses societal wrongs.
The primary goal of civil law is to provide compensation for financial losses or damages incurred.

Law Interpretation

Common law relies on precedents set by previous court decisions, promoting consistency and coherent legal interpretations.
Statute law, produced by governmental legislative processes, supersedes common law where applicable, impacting definitions of legal age and responsibilities.

Occupiers’ Responsibilities to Invited Persons

Invitees enter premises by invitation and are involved in activities related to the owner's interests, primarily business-related.
Occupiers have higher liability towards invitees compared to trespassers and must protect them from both known and hidden dangers.

Employee Liability and Compensation

Employers face liability concerns for injuries employees suffer while working, primarily covered by Workers’ Compensation Acts that provide no-fault insurance.
Exceptions to employer liability arise when employees are engaged in activities outside their employment scope or in non-covered occupations.

Independent Contractors

When occupiers hire independent contractors, they can limit their liability for negligence if they exercised reasonable care in the selection of the contractor and if the work undertaken was appropriate and necessary.

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Description

This quiz covers the essential aspects of Business Interruption Insurance, emphasizing its importance alongside commercial property insurance. Understand how this coverage helps businesses financially during periods of lost income due to property damage. Test your knowledge on endorsements and the implications for business operations.