CPCU 551 Exam 1: Commercial Property and Business Income Insurance, Exams of Commercial Law

Download CPCU 551 Exam 1: Commercial Property and Business Income Insurance and more Exams Commercial Law in PDF only on Docsity!

CPCU 551: ASSIGNMENT 1 EXAM 100%

CORRECT QUESTIONS & ANSWERS!!

1.1 3 common sources of property coverage for commerical entities - ANSWER1. Insurance Services Office, INC (ISO) 2. Building and Personal Property Coverage Form (BPP) 3. Business Income Coverage Forms (BIC)

BPP Form - ANSWERBuilding and Personal Property Coverage Form Provides coverage for buildings, business personal property, and the personal property of others.

Would manufaturing equipment and finished clothing (stock) stored in Garmentville's warehouse be considered covered forms of business personal property under the BPP?

• ANSWERYes, unless specifically excluded.

1. BPP provides additional coverages and coverage extensions for... - ANSWERdebris removal, preservation of propety, fire department service charges, pollutant cleanup and removal, increased cost of construction, electronic data, new property, personal effects, property of others, valuable records, and nonowned detatched trailers.
2. Most organizations use insurance as... - ANSWERa risk control technique to pay for losses. 1.1 What techniques could businesses use to reduce risk of loss from fire? - ANSWER1. Separate heat sources from fuels 2. Install fire detection and suppression systems 1.1 What techniques could businesses use to reduce risk of loss from explosion? - ANSWER1. Explosion suppressors 2. Proper storage, use, and maintenance and inspection of expllosive materials and equipment
3. What techniques could businesses use to reduce risk of loss from windstorm? - ANSWER1. Design structures to withstand strong winds 2. Add storm shutters and blinds for windows 3. Secure material and equipment outside facility 4. Place trees and utility poles away from structures 1.1 What techniques could businesses use to reduce risk of loss from water? - ANSWER1. Sensor that detect the presence of water 2. Shut off source of water 3. Notify building management

1.2 What is the severity of a business income loss is related to? - ANSWERthe length of time required to restore the property

Business interruption - ANSWERLoss of revenue that a business or another organization sustains because its operations are suspended as a result of physical injury to its property

Profit - ANSWERNet income that results when revenues exceed expenses.

Net loss - ANSWERNet income that results when expenses exceed revenues. 1.2 Continuing expenses - ANSWERExpenses that continue to be incurred during a business interruption.

Noncontinuing expenses - ANSWERExpenses that will not continue during a business interruption.

Extra expenses - ANSWERExpenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption. 1.2 Examples of continuing expenses - ANSWER1. Payroll of jey employees 2. Debt repayments 3. Taxes 4. Insurance premiums

What lessens the severity of business income loss during a business interruption? - ANSWERReduction in expenses 1.2 How is the business income calculated if an organization generates no revenue? - ANSWERLost profit + continuing expenses + extra expenses 1.2 Examples of extra expenses - ANSWER1. Overtime labor 2. Replacement supplies

3. Supplies to mitigate covered peril 1.2 Can a tenant's operation be interrupted by damage to the building the tenant is located at even if the part of the building they occupy isn't damaged? - ANSWERYes, - for example an explosion that debilitates heating, air-conditioning, and ventilating equpment can make a building uninhabitable

Can physical damage from another location cause a business interruption elsewhere? - ANSWERYes, - for example, off-premises property that provides utilities such as electircity, water, or communications. 1.2 Business continuity plan - ANSWERPlan that details steps to take after a disaster to ensure operations continue 1.3 What is generally excluded under standard commercial property policies? - ANSWEREquipment breakdown loss

What is the key to identifying equipment breakdown exposures? - ANSWERUnderstanding the insured's operations 1.3 Equipment breakdown insurance - ANSWERCoverage for loss resulting from the accidental breakdown of covered equipment 1.3 Examples of covered damage under equipment breakdown insurance - ANSWERCan include damage to the insured's building, equipment, and building contents. Almost any type of equipment that operates under pressure or controls, transmits, transforms, or uses mechanical or electrical power. 1.4 Marine insurance - ANSWERInsurance that, in the U.S., includes both ocean and inland marine coverage and, in the rest of the world, is limited to insurance for vessels and cargo. 1.4 Inland marine insurance - ANSWERInsurance that covers many different classes of property that typically involve an element of transportation on land. 1.4 Ocean marine insurance - ANSWERInsurance that covers vessels and their cargoes, including various vessel-related liability exposures. 1.4 Tranportation exposures - ANSWERlimited to the possibility of loss to property being transported - not to the conveyances on which it's carried 1.4 Loss exposures involving property in transit can become more complicated as what happens? - ANSWERAdditional parties become involved

Who owns the goods during the course of transit is specified by what? - ANSWERthe terms of sale - usually stated in the purchase order or contract of sale 1.4 Where does the responsibility of loss fall if the carrier is insolvent and unable to pay a cargo claim for which it is liable? - ANSWERthe loss falls on the owner

1.4 Carrier Responsibility for Loss - ANSWERWhen a carrier transports goods it may be responsbile for any damage or loss. This does not eliminate the owner's loss exposure, it only provides a possible source of recovery 1.4 What rules are domestic shipments over either inland waterways or the coastwise sea lanes by common carrier subject to? - ANSWERthe Harter Act unless the carrier and shipper agree to be subject to COGSA 1.4 What is the shipowner's liability for damage to chartered property (contract carriage by water) determined by? - ANSWERthe contract of carriage, also called the charter party. In many cases, the shipowner and charterer agree to abide by the rules of COGSA. 1.4 What rules is the liability of air carriers engaged in international service is governed by? - ANSWERthe International Warsaw Convention 1.4 In the 19050's what did legislation permit that rendered the Nationwide Marine Definition unnecessary for restrictive purposes? - ANSWERa single insurer to offer fire, casualty, and marine coverages 1.4 Compared to other lines of insurance, typically, commerical inland and ocean marine insurance are subject to what? - ANSWERless rate and reform regulations than other lines of insurance 1.4 Do inland marine policies have territorial limits? - ANSWERInland marine policies may have territorial limits (for example, the United States and Canada) or provide coverage anywhere in the world. 1.4 International Warsaw Convention - ANSWERAn air carrier is not liable for loss to cargo if it can prove that it took all of the necessary steps to avoid loss or that the loss was caused by pilot error. 1.4 Domestic air carriers are governed by what rules? - ANSWERThey have freedom in choosing from many liability rules under which they operate.

How did inland marine insurance start? - ANSWERMarine insurerers were used to covering ocean cargos of all types against many different causes of loss, including theft, while the property was at sea or shore. Because they were more willing to provide "all- risks" coverage on property U.S. fire insurers avoided, they started a new brand called "inland marine". Inland marine coverage continues to be a source of flexible coverage solutions today. 1.4 How and when was inland marine insurance made official? - ANSWERIIn 1933 the National Association of Insurance Commisioners (NAIC) adopted a Nationwide Marine Definition to determine whether a particular coverage fell within marine insurance

(inland or ocean). The definition restricted the underwriting powers of marine insurers to specified types of property. 1.4 Insurance regulators have divided inland marine classes of business into two class categories: - ANSWERfiles classes and nonfiled classes 1.4 In some cases, property being insured under an inland marine nonfiled policy is what? - ANSWERSo unusual or the coverage terms are so specialized that there is not enough previous loss information to adequately price the coverage. 1.4 When an inland marine nonfiled policy is so specialized, underwriters rely on WHAT to set rates? - ANSWERTheir best judgement, judgement rating may require an underwriter to have expertise in a specialized field. 1.4 Inland Marine Filed class - ANSWERMust file policy forms and/or rates with their state insurance department. Policies in this class are created for a large number of insureds with similar loss exposures. 1.4 Inland Marine: Non-filed class - ANSWERDo not have to rfile policy forms or rates with their state insurance department. Policies in this class are created for a small number of insureds with diverse loss exposures.