Finance 431: Property-Liability Insurance Lecture 11: Commercial Property Insurance - Continued

A loss caused by an explosion would be covered under which of the BPP Cause of Loss Forms? A)Basic, Broad and Special Form B)Broad and Special Form only C)Special Form only D)None of the forms cover this

A loss caused by a falling object would be covered under which of the BPP Cause of Loss Forms? A)Basic, Broad and Special Form B)Broad and Special Form only C)Special Form only D)None of the forms cover this

Exclusions Vary by Policy Form Broad Form Exclusions (Appendix C – pages ) Ordinance or law Earth movement Governmental action Nuclear hazard Off-premises services War or military action Water Electrical current Explosion of steam boilers Mechanical breakdown Special exclusions: –Specified coverage forms

A policyholder has a BPP policy with the Broad Form Cause of Loss coverage. Would losses caused by an earthquake be covered? A)Yes B)No C)It depends on the policy D)None of the above

A policyholder has a BPP policy with the Broad Form Cause of Loss coverage. Would losses caused by a flood be covered? A)Yes B)No C)It depends on the policy D)None of the above

A policyholder has a BPP policy with the Broad Form Cause of Loss coverage. Would losses caused by a hurricane be covered? A)Yes B)No C)It depends on the policy D)None of the above

Consequential Property Coverage Business Income Coverage (BIC) Business interruption Net income Continuing normal operating expenses incurred, including payroll Extra expense Causes of loss Direct physical loss or damage to property described in declarations Coinsurance Monthly limit of indemnity Maximum period of indemnity Payroll endorsements

Business Income Coverage Example (Page 250) Chicago flood of 1992 Expected net income for April 1992 $45,000 Actual net income in April 1992 ($72,000) Value of loss$117,000

Other Property Coverage Commercial Crime Coverage Inland Marine Boiler and Machinery Businessowners Policy

Inland Marine Insurance Development Regulatory restrictions on other coverages Could offer all-risk coverage Less restrictive regulations

Nationwide Marine Definition Imports Exports Domestic shipments Instrumentalities of transportation and communication (bridges, tunnels, piers, power lines, television towers) Various types of individual personal property (jewelry, furs, instruments) Various types of business property (mobile equipment, animals, computers)

General Characteristics of Inland Marine Policies Coverage for property in transit Loss exposures covered Physical loss Business income and extra expense Broad coverage of perils Valuation provisions Actual cash value, replacement cost, selling price, invoice value or agreed value

Global Property Exposures Laws and regulations in foreign countries Data collection and analysis Exchange rate risk International property-liability coverages