CPCU 551 Chapter 4 Exam: Insurance Coverage and Endorsements, Exams of Commercial Law

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CPCU 551 - CHAPTER 4 EXAM 2025

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Blanket Insurance - ANSWERInsurance that covers either of the following with one limit of insurance: (1) one type of property in one or more separately rated buildings or (2) two or more types of property in one or more separately rated buildings. A disadvantage of blanket insurance is that the minimum coinsurance percentage is ____% - ANSWER90% Specific insurance provides a __% discount with 90% coinsurance - ANSWER5% No discount is offered w/ blanket insurance What are 2 advantages of blanket insurance? - ANSWER1) Insured with multiple locations is fully insured for a loss at any one location 2)Additional debris removal coverage is available if the insured selects blanket coverage Risk managers prefer to combine Agreed Value with Blanket insurance, however risk managers are often reluctant to combine these coverages without a _______________________ - ANSWERMargin clause - provides the insured's recovery is limited to specified % above the value filed with the insurer. Example: Margin clause: 20% Filed value: $2M Agreed Value Loss = 2M *. Max loss collected: $2.4M Benefits of combining Agreed Value w/ Blanket: -Insured and insurer agree on value up front -Avoid coinsurance penalty -Danger of underinsurance is greatly reduced Name the 2 approaches for dealing with fluctuating personal property values - ANSWER1) Peak Season Limit of Insurance Endorsement - used when inventory values are somewhat predictable

2. Value reporting - used when fluctuations are not as predictable Advantages of the Peak Season Limit of Insurance Endorsement? - ANSWER1) Eliminates the need for extra transactions to change value based on fluctuating inventory

[(Reported/Actual) x Loss ] - Deductible Value Reporting Form - Important to set insurance limit amount of _____________________________ - ANSWERMaximum possible loss Value Reporting Form carries a limit of insurance that is the most the insurer will pay. Limit of insurance is usually set higher than __________________________________ - ANSWERMaximum value expected Business Personal Property - Limited international Coverage endorsement excludes: - ANSWER1) Property held for sale in the foreign coverage territory

2. Property in the care of of a bailee unless bailee is also transporting the insured or its rep Note that losses are valued in US currency, based on the value where the property is PERMANENTLY located Value Reporting Form - initial premium is typically _____% of annual premium required to purchase non-reporting coverage with same limit. - ANSWER75% -Typically paid at the beginning of the policy period -Premium adjusted at end of policy period (may be an AP or RP, calculated on a pro- rata basis Business Personal Property - Limited international Coverage - ANSWERThis endorsement extends the insured's business personal property coverage to include certain property in, or en route to or from, a foreign coverage territory. The endorsement schedule provides blank space to list a specific foreign territory or a box to select all foreign territories. For coverage under the Business Personal Property - Limited international Coverage endorsement to apply, the property must meet these criterias - ANSWER1) Temporarily in the foreign coverage territory specified in the schedule
3. Used in the insured's business in the foreign coverage territory
4. Located at a business location the insured owns, operates or leases; or in the care, custody, or control of the insured or its authorized rep. Property in Process of Manufacture by Others- Limited International Coverage - ANSWEREndorsement covers in-process goods being manufactured in a foreign country (does not cover merchandise held for sale) Property in Process of Manufacture by Others- Limited International Coverage covers goods at a location only if - ANSWERthe location is not owned, operated, or leased to

the insured (coverage continues while these goods are temporarily stored awaiting transportation) Property in Process of Manufacture by Others- Limited International Coverage does not provide coverage for - ANSWER1) Property in transit or held by bailees

2. Property at premises owned or leased by the insured
3. Territory where sanction or embargo prohibits the transaction covered
4. Territory where this coverage is prohibited Losses are valued based on US costs even if property is replaced overseas True or False: Sometimes, excluded property has a lower risk of loss than covered property - ANSWERTrue Increased Cost of Loss and Related Expenses for Green Updates - ANSWER*Wants to replace damaged property with a more environmentally friendly option3 Coverages:

1. Additional limit of insurance to cover the increased cost of replacing damaged materials with green updates
2. Higher amounts for "green" expenses, such as waste reduction and recycling expenses
3. 30-day extension of the business income and extra expense period of restoration to cover extra time needed for green updates The Additional Covered Property can be used to insurer - ANSWERProperty excluded from the BPP such as foundation, walkways, bridges, underground pipes etc Specified Business Personal Property Temporarily Away from Premises endorsement - ANSWERcovers business personal property such as electronic devices carried by the named insured's employee while away from the described premises but within the regular coverage territory of the US, its territories, Puerto Rico, and Canada More flexible than the Property Off-Premises coverage extension of the BPP, which is limited to $10K only The Specified Business Personal Property Temporarily Away from Premises endorsement excludes ______________________ except while at a fair, trade show, or exhibition - ANSWERproduct sample If theft is a covered cause of loss in the insured's policy, the Specified Business Personal Property Temporarily Away from Premises endorsement covers theft only __________________ - ANSWERIf there are visible marks of force entry

2. Discharge limit for business interruption
3. Annual Aggregate Increased in Rebuilding Expenses Following a Disaster - ANSWER*Covers higher repair costs and labor as a result of supply issues following a declared disaster *May also increase debris removal and ordinance of law coverage Ordinance or Law Coverage Endorsement - ANSWER1. Coverage A: pays for value of undamaged property that must be demolished

2. Coverage B: pays for costs of demolition and debris removal
3. Coverage C: pays for increased costs due to building code improvements (at time of loss) Ordinance or Law Coverage Endorsement - if coverage is on a replacement cost basis, Coverage A pays the lowest of - ANSWER1) the amount the insured spends

2. the cost to restore a comparable building
3. the insurance limit Functional Building or Personal Property Valuation - ANSWER*Provides modified replacement coverage (used when replacement cost is higher than market value) *For losses, insurer pays cost to repair/replace materials or design EXAMPLE: Replace plaster walls with dry wall EXAMPLE: Unique machinery (gas burger grill) *If repaired insurer pays: 1.Limits of insurance

2. Cost to replace/repair
3. Cost to replace with equivalent property *Deletes coinsurance requirement *Includes "ordinance of law coverage" because of building codes Manufacturer's Selling Price (for finished stock) - ANSWERExtends the retail price valuation of finished stock whether it is sold or not

*Important for a manufacturer that wants protection against loss of business income from an insured peril