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CPCU 551 Chapter 4

Chapter 4 Notes

QuestionAnswer
List the three types of valuation methods for BPP that can be made by endorsement to the policy? Manufactors selling price, Functional Building Valuation, Functional Personal Property Valuation
Define Manufacturers Selling Price Endorsement? An endorsement that values finished stock at selling price less any discount or expenses that they would have incurred regardless.
Define Functional Building Valuation Endorsement? An endorsement that provides for modified replacement cost on buildings. Useful in buildings where replacement cost far exceeds market value.
Under functional building valuation endorsement if the insured fails to contract for repairs within 180 days the insured pays the less of? Limit of insurance shown on the endorsement, market value of the building, the cost to repair/ replace on the same site less allowance for depreciation.
Define Functional Personal Property Valuation Endorsement? Endorsement allowing for valuation of a loss of personal property (not stock) at replacement cost. Might be good choice for old equipment.
If insured contracts for repair or replacement of personal property within 180 days from loss under the FPPV endorsement how is it valuated? Lesser of limit of insurance, cost to replace with equivalent, the amount necessarily spent to repair or replace.
If insured contracts for repair or replacement of personal property after 180 days from loss under the FPPV endorsement how is it valuated? The lesser of the limit of insurance, market value, amount it would cost to repair or replace the lossed equipment less depreciation.
Define Specific Insurance? Method of insuring buildings and personal property by scheduling a specific amount in declarations for each.
Blanket Insurance covers either of (2 things) One type of property in one or more buildings, or two or more types of property in one or more separate buildings.
In what ways can Blank Insurance be advantageous? 1) An insured with multiple locations would be fully insured for a loss at one location without potential coinsurance penalty 2) Sudden increases of inventory at one location 3) Includes debris removal up to the limit.
What options are available for insuring personal property for an insured with flucation in values? 1) Peak Season Endorsement 2) Value Reporting Form
Define Peak Season Endorsement Provides differing amounts of insurance for selected time periods during a policy term.
Define Value Reporting Form? Avoids the cost of over or under insuring property by setting a limit high enough to cover max value at any time during a period.
How is value reporting insurance charged? The insured reports values of property at certain times during the period and at the end the insurer computes an average value exposed and premium is computed.
What are the 5 different reporting period options? DR (daily reported monthly, WR (value at last day of the week reported monthly), MR (last day of the month reported monthly), QR value at last day of the month reported quarterly (most common), PR value at last day of the month reported at end of policy y
Describe the penalty for failure to submit required valuation reports timely? The insurer has to pay no more then 75% of the amount that would have been paid (if due at time of loss and not received). If insured failed to submit any report (after the first) the insurer is required to pay no more then value last reported.
How is the insurance payment calculated under the value reporting form method? Limit of Insurance/ agreed value x loss- deductible
Is the limit of insurance usually placed on property under value reporting usually higher or lower then the anticipated value? Higher
What percentage of "provisional premium" is usually charged up front with value reporting method? 75% of what would be charged under a non reporting system.
How does the value reporting form define "specific insurance"? Other insurance covering the same property to which the value reporting endorsement applies.
How is property covered that has a value reporting endorsement along with specific insurance? Excess over the total of 1)the amount due from specific insurance plus 2) the amount of any deductible applied to the specific insurance payment.
List the 2 endorsements for limited international coverage? 1) Business personal property limited international coverage 2) Property in process of manufacture by others
What criteria must be met relative to the business personal property limited international endorsement? 1)temporarily in foreign country specified in the schedule 2) Used in the insureds business in the foreign country 3) located at a business location owned by the insured or in care or control of insured or it authorized representative.
Neither foreign endorsement covers these two things? Merchandise held for sale or property permanently outside the US.
Define the Manufacturers Consequential Loss Assumption Endorsement? Provides coverage when damage to parts of stock in the process of manufacture causes a reduction in value to the remaining parts of stock. (ie product cannot be finished)
Define the Brands and Labels Endorsement? Protects the reputation of insureds goods when insurer takes their product as salvage. It requires that insurers pay to rebrand merchandise if they salvage it.
What actions can the insured take against insurer to protect its brands and labels? Make them stamp "salvage on merchandise, remove brands and labels.
List the 3 coverages provided with Ordinance of Law Endorsement? Coverge A (reduction in value of undamaged portion of building that needs to be demolished) Coverage B (Covers cost to demolish undamaged portion and remove contents) Coverage C (Covers the increased cost to repair or reconstruct due to ordinances)
Does coinsurance apply to coverage A? Yes but not to B and C.
What is paid if replacment cost is chosen for coverage A? The lesser of the amount actually spent, what it would cost to restore a comparable building, the limit of insurance.
Must the ordinance or law be in place at the time of the loss? Yes coverage does not exist for law changes after the loss.
None of the ordinance of law coverages pay for? Loss resulting from failing to comply with ordinance required before the loss, costs associated with insured to respond or assess effects of pollution, law requiring to respond or assess fungus wet or dry rot or bacteria.
If two perils exist causing loss and one is not covered how is ordinance coverage managed? The part covered is equal to portion caused by covered peril, if damage by covered peril alone would have required compliance it will pay, if solely caused by other peril it will not pay.
Define Utility Services Coverage Endorsement? Provides coverage for damage to property caused by utility services caused by the interruption of service.
The endorsement for utility services does not cover? Loss or damage of electronic data. Policy Limits are a sublimit so does not increase the total limit of insurance.
Define Spoilage Coverage Endorsement to cover spoilage caused by a power outage or equipment failure. It provides broader coverage then utility endorsement in the outage does not have to result from an insured peril. It must however be beyond the insureds control.
Is there a defined limit for spoilage coverage? No
Created by: GARYSCHILD