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CHAPTER 6

Commercial Property-Casualty Insurance (Part i)

 Commercial Property Coverage
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 The Building and Personal Property Coverage

Form
 Business Income Coverage Form
 Other Forms and Endorsements
Building and Personal Property Coverage Form

 The building and personal property coverage form is a

commercial property coverage part that is widely used to
cover a direct physical damage loss to commercial
buildings and personal property
 Property covered
 Buildings
 Insured’s business personal property
 Personal property of others in the insured’s care, custody
or control
Buildings
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The form covers the buildings described in the

declarations, including fixtures and permanently
installed machinery and equipment
 Completed additions
 Permanently installed fixtures and equipments
 Outdoor fixtures
 Personal property owned by the insured used to service the
building or its premises
 Additions under construction, alteration, repairs
 Personal Property
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This personal property must be located in or on the building

described in the declarations.
Business personal property, such as:
 Furniture and fixtures
 Machinery and equipment
 Stock, computer
 All other personal property owned by insured
 Labor, materials, or services furnished or arranged by the insured on
the personal property of others
 Includes the insured’s interest in improvements and betterments as a
tenant
 Personal property of others in the care, custody, or control of the
named insured is also covered
 Personal Property of Others
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Under certain conditions, the insurance can be extended to

cover other property:
 Subject to the same location restriction mentioned

earlier.
 This coverage protects persons or property other than

the insured.
 The named insured may purchased to avoid liability

claims, as goodwill gesture, or as part of an

agreement for which the others pay a fee to the
named insured
 Building & Personal Property Coverage
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Form
 A causes-of-loss form must be added to the policy to
have a complete contract
 The form specifies the covered perils for the business
and personal property coverage
 Insureds can select one of the following forms:
 Causes-of-loss basic form
 Causes-of-loss broad form
 Causes-of-loss special form
Building & Personal Property Coverage
Form 8

 The causes-of-loss basic form provides coverage for 11

basic causes of loss:
 Fire
 Lightning
 Explosion
 Windstorm or hail
 Smoke
 Physical contact by vehicles, aircraft, missile, or other object
 Riot or civil commotion
 Vandalism
 Sprinkler leakage or accidental discharge
 Sudden sinking of land
 Volcanic eruption
 Building & Personal Property Coverage
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Form
 The causes-of-loss broad form includes all causes of
loss covered by the basic form plus:
 Falling objects
 Weight of snow, ice, or sleet
 Water damage
 Accidental discharge/leakage of water/steam
 Collapse of part or all of the building
 Building & Personal Property Coverage
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Form
 The causes-of-loss special form insures against “risks of direct
physical loss” (formally call “all risks”) unless specifically excluded
 Important exclusions include loss due to the enforcement of an
ordinance or law, flood and earth movement.
 The burden of proof falls on the insurer to show that the loss is not
covered.
 Provides three additional extensions of coverage
 Personal property in transit is covered for certain causes of loss

 Damage result from a covered water damage loss

 Coverage also includes glass damage

 Excluded Property
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 Accounts, bills, currency, evidence of debt, money, notes, securities

 Bridges, roadways, walks, patios
 Cost of excavation, grading, filling
 Building foundations
 Growing crops or lawns
 Pilings
 Personal property while waterborne
 Property covered elsewhere
 Retaining walls
 Underground pipes, flues, or drains
 Valuable papers and records
 Self-propelled vehicles
 Animals, aircraft, and watercraft
 Reporting Forms
 The reporting form is used to insure fluctuations in business
personal property
 Premiums are based on the actual value of the covered
property
 The insured can report inventory on a daily, weekly, monthly,
quarterly or annual basis
 If the insured underreports the property values at a location,
and a loss occurs at that location, recovery is limited to the
proportion that the last value reported bears to the correct
value that should have been reported
 Other Commercial Property Coverages

 Some firms have certain needs that require more specialized

property coverage
 A builders risk coverage form can be used to insure buildings
under construction
 Covers the insurable interest of a general contractor,
subcontractor, or building owner
 A builders risk reporting form can be attached as an
endorsement
 Requires the builder to report monthly on the value of the
building under construction
 As the building progresses, the amount of insurance on the
building is increased, and premiums are adjusted based on
the values reported by the builder
 Business Income Insurance
 Business income insurance is designed to cover the loss of
business income, expenses that continue during the shutdown
period, and extra expenses because of loss from a covered peril
 One form is the business income (and extra expense) coverage
form
 This form covers the loss of business income due to
suspension of operations during a period of restoration
 Suspension must result from a covered direct physical
loss
 Extra expenses, such as relocation costs, are also covered
 An extended business income provision covers the reduction
in earnings for a limited period after the business reopens
 Business Income Coverage Form
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 The insurer pays for the actual and necessary loss of

income the insured organization sustains if its
operations are suspended due to a covered peril
causes direct physical loss of or damage to the
insured property. The covered perils depend on the
four causes-of-loss forms is referred to.
 In Malaysia, the Business Interruption Insurance is
attached to the Fire Insurance policy.
 Definition of Business Income
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 Business income is defined as the net profit or

loss before income taxes that would have been
earned, and continuing normal operating
expenses, including payroll
 The suspension period that is covered starts with the date of
the physical loss or damage to the property and ends on the
date when that property should be repaired, rebuilt, or
replaced if the insured acts with reasonable speed to obtain
similar quality. The covered period does not include any
additional time required because of any law that regulates the
construction, use, or repair, or requiring the tearing down of
any property.
 Business Income Coverage Form
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 4 additional coverage provided

 Alterations and new buildings
 Action of civil authority
 Extra expenses
 Extended business income
 Alterations and new buildings
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 Insurer promises to pay business income losses due

to physical loss or damage to new buildings or
structures, whether complete or under construction,
or to alterations or additions to existing buildings
or structures.
 Action of Civil Authority
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 Insurer will pay any resulting business income loss

for up to two weeks, if civil authorities prohibit
access to described premises due to physical loss or
damage to property that is not on the described
premises.
 Extra Expenses
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 Insurer will pay any expenses exceeding normal

expenses that the insured incurs to avoid or minimize
the suspension of business income by continuing
operations at the described premises or at
replacement locations, which may be temporary.
 If the insured continues operations at replacement
locations, the insurer will pay relocation expenses
and costs to equip and operate the replacement
locations.
 Extended Business Income
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 The insurer will pay the loss of business income the

insured incurs during the period that starts with the
date the property is actually repaired or replaced and
operations are resumed and ends 30 days later, or if
earlier, on the date the insured could restore the
business to its pre-loss level if it acted with
reasonable speed.
 This coverage recognizes that the insured may need
some time after operations are resumed to restore its
business to its former sales or production volume and
profit level.
 Other Forms and Endorsements
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 Business Personal Property- Separation of

Coverage form
 Legal Liability coverage form
 Leasehold Interest coverage form
 Glass coverage form
 Business Income from Dependent Properties
coverage form