Property and Casualty Insurance Test 1

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the purpose of a liberalization clause in the policy conditions?

The liberalization clause broadens coverage for the insured if the insurer adopts any policy revision that would broaden coverage without an additional premium.

According to the Common policy conditions, over what time period is the insurer permitted to examine and audit the insured's books and records related to the policy?

The insurer is permitted to examine and audit the insured's books and records at any time during the policy period and for up to three years after the policy's termination.

What coverage parts are required in a commercial package policy (CPP) under ISO's Commercial Lines Manual (CLM) rules?

Business personal property and commercial general liability.

How is the deductible applied to a loss payment under the BPP?

The insurer is not obligated to pay unless the loss exceeds the deductible; the limit of insurance applies to the adjusted amount of loss in excess of the deductible. Signup and view all the answers

What three general categories of property does the Building and Personal Property Coverage Form (BPP) cover?

Buildings, your business personal property, and personal property of others. Signup and view all the answers

In addition to business personal property owned by the named insured, what else does Your Business Personal Property include?

It includes labor, materials, services furnished on personal property of others, the insured's use interest in improvements and betterments, and leased personal property. Signup and view all the answers

What does BPP Building coverage include other than the building itself?

It includes completed additions, fixtures, permanently installed machinery and equipment, personal property used for maintenance, and construction materials within 100 feet of the premises. Signup and view all the answers

The BPP covers unlicensed ______ used mainly on the insured's own premises.

vehicles Signup and view all the answers

Animals owned by the insured are always covered by the BPP.

False Signup and view all the answers

What items that might otherwise be considered building property does the BPP exclude?

The BPP excludes land, water, bridges, roadways, and contraband. Signup and view all the answers

High-Rise Company's furniture located in several furnished apartments is covered under its BPP.

True Signup and view all the answers

Improvements and betterments made by a tenant are covered by the BPP.

False Signup and view all the answers

The general categories of personal property that the BPP excludes include outdoor property, money and securities, and ______.

vehicles Signup and view all the answers

List the four optional coverages available in the BPP.

Agreed Value, Inflation Guard, Replacement Cost, Extension of Replacement Cost to Personal Property of Others. Signup and view all the answers

To what perils does the mold exclusion not apply?

The mold exclusion does not apply to mold resulting from fire or lightning. Signup and view all the answers

What losses does the fire peril cover in addition to loss of property actually burned by a fire?

The fire peril covers heat and smoke damage from a hostile fire, and damage from attempts to extinguish the fire. Signup and view all the answers

Identify examples of theft-related acts for which coverage is excluded under the Special Form.

Dishonest acts of the insured, voluntary surrendering of property due to fraud, loss of construction materials not attached to the building, and property that is missing without explanation. Signup and view all the answers

What limitations apply to the aircraft or vehicles peril?

Physical contact between the aircraft or vehicle and the covered property is required; the peril excludes damage caused by vehicles owned by the insured. Signup and view all the answers

How were property insurance policies modified in response to the concurrent causation doctrine?

Exclusions were re-worded and 'all' was removed from 'all-risks' policies. Signup and view all the answers

What conditions must the insured meet to be covered for water damage that results from freezing of pipes?

The insured must maintain heat in the building or shut off the water supply and drain the equipment. Signup and view all the answers

To what types of loss does the vandalism peril not apply?

The vandalism peril excludes loss covered by theft and building damage caused by the entry of burglars. Signup and view all the answers

What perils does the Earth Movement exclusion eliminate in addition to earthquake?

The Earth Movement exclusion eliminates landslide, mine subsidence, and volcanic eruption, except for specific volcanic actions. Signup and view all the answers

List the perils covered by the Causes of Loss - Basic Form and the additional perils covered by the Causes of Loss - Broad Form.

The Basic Form covers fire, lightning, explosion, windstorm, smoke, and more. The Broad Form adds falling objects and water damage. Signup and view all the answers

Why do the causes of loss forms exclude loss resulting from the enforcement of building ordinances or laws?

Building ordinances can increase repair costs, and coverage for these costs requires an additional premium. Signup and view all the answers

Identify examples of perils that the Special Form specifically excludes.

Wear and tear, rust, smog, and mechanical breakdown are excluded perils. Signup and view all the answers

Identify advantages to the insured of purchasing Causes of Loss - Special Form.

Certain causes of loss excluded under the Broad Form are covered, and the burden of proof shifts to the insurer. Signup and view all the answers

Study Notes

Liberalization Clause

Broadens coverage for the insured automatically when the insurer adopts policy revisions during the policy period or up to 45 days prior to inception, at no additional premium.

Examination and Audit Period

Insurer can examine and audit the insured's records during the policy period and for up to three years post-termination.

Required Coverage Parts in CPP

Business Personal Property and Commercial General Liability are mandatory under ISO's Commercial Lines Manual.

Deductible Application under BPP

Insurer pays only for losses exceeding the deductible, applying the limit of insurance to the loss amount over the deductible.

Coverage Agreements in BPP

The Building and Personal Property Coverage Form includes:
- Buildings
- Your Business Personal Property
- Personal Property of Others

Components of Your Business Personal Property

Includes labor, materials, or services on others' property, improvements and betterments, and leased property with insurance obligations.

BPP Building Coverage Extensions

Covers completed additions, fixtures, machinery, personal property for building maintenance, and construction additions within 100 feet of the premises.

BPP Coverage for Specific Personal Property

Vehicles covered: Unlicensed vehicles on the premises, vehicles manufactured/processed/warehoused, and vehicles held for sale.
Animals owned by the insured are typically excluded, except for those held for sale or boarded.

Exclusions Under BPP

BPP excludes land, water, bridges, roadways, non-building retaining walls, bulkheads, excavation costs, and contraband, although exceptions may apply.

BPP Coverage Examples for High-Rise Company

Covered: Equipment for building maintenance, furniture in furnished apartments, new plumbing fixtures on premises.
Not Covered: Improvements and betterments made by tenants.

General Exclusions in BPP

Exclusions include outdoor property, money/securities, vehicles/aircraft, animals, specific described properties in other policies, and contraband.

Optional Coverages in BPP

Available optional coverages include:
- Agreed Value
- Inflation Guard
- Replacement Cost
- Extension of Replacement Cost to Personal Property of Others

Mold Exclusion Specifics

Mold exclusion does not apply if mold is a result of fire extinguishing efforts or lightning.

Fire Peril Coverage

Covers not only burned property but also heat and smoke damage from hostile fire and damage during fire extinguishing efforts.

Exclusions include dishonest acts by the insured's associates, voluntary property surrender due to fraud, theft of unattached construction materials, and unexplained property losses.

Limitations of Aircraft or Vehicle Perils

Coverage requires physical contact with the aircraft or vehicle and excludes damage caused by vehicles owned or operated by the insured.

Modifications to Property Insurance Policies

Policies reworded due to concurrent causation, removing "all" from "all-risks," and excluding collapse unless caused by named perils.

Conditions for Freezing Pipe Damage Coverage

Water damage from frozen pipes is excluded unless the insured maintains heat in the building or drains equipment if unable to maintain heat.

Vandalism Peril Exclusions

Vandalism peril excludes losses covered by theft, limiting coverage primarily to building damages from forced entries.

Earth Movement Exclusion Details

Excludes various earth movements (earthquake, landslide) and volcanic activities apart from sinkhole collapses.

Causes of Loss Forms Coverage

Causes of Loss - Basic Form includes various perils such as fire, explosion, windstorm, and vandalism, while the Broad Form expands coverage to falling objects and water damage.

Enforcement of Building Ordinances Exclusion

Building ordinance compliance increases repair costs significantly; hence, insurers charge additional premiums for extended coverage.

Special Form Perils Exclusions

Excluded perils include wear and tear, rust, decay, mechanical breakdown, damages from pest waste, and damages due to environmental conditions.

Advantages of Causes of Loss - Special Form

Covers additional risks not included in the Broad Form, accommodates unforeseen losses, and shifts burden of proof from insured to insurer.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz focuses on the fundamental concepts of property and casualty insurance, including essential policy features like the liberalization clause. Test your knowledge of key terms and definitions that are vital for understanding insurance policies and coverage. Perfect for students or professionals preparing for their insurance exams.