9-1: Review Questions AND 9-3: Mini-Case Studies

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9-1 Review Question:

In your own words, answer the following questions in a Word document. Provide detailed explanations, including at least one example where indicated.

  1. What are the advantages of the BOP for insureds?
  2. Why are eligibility rules needed for BOPs?
  3. What insurance to value requirement must be met for a loss to qualify for full replacement cost coverage under the BOP? Provide an example.
  4. Compare the Products/Completed Operations Aggregate Limit in the BOP to the CGL’s aggregate limit.
  5. Explain what is covered by the different types of crop insurance.
  6. What are 2 examples of fired pressure vessels and unfired pressure vessels?
  7. What are common causes of loss for office equipment and systems breakdown?
  8. What are the primary exposures for ‘main street’ business equipment?
  9. What is “covered property” under the Property Damage insuring agreement?
  10. Other than a dollar deductible, what are the 3 types of deductibles in an equipment breakdown policy?
  11. What are the types of limits that may apply under an equipment breakdown policy?

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9-3 Mini Case Studies:

Answer the following questions in your own words in a Word document. Remember these are mini-case studies, not review questions, and as such your responses are to be in complete sentences and paragraphs, with at least 350 words for each numbered question. Review the associated rubric to understand the response content expected. Please restate the question in your document but do not count these words in your total response length.

  1. Sam is the owner of Sam’s Smoke Shop, a retail store selling cigars, pipes, pipe tobacco, cigarettes, lighters, ash trays, and other smoking-related items. Sam leases 1,600 square feet in a one-story strip mall, which contains seven other retail shops. The store space is used primarily for the display of merchandise. There is a small office and stock room in the rear. During a severe summer storm, lightning struck an adjoining store. Fire ensued and spread to Sam’s Smoke Shop, causing considerable damage to Sam’s business personal property. The shop was closed for two months for repairs. During that time Sam sublet space in an adjoining store, which resulted in a net reduction of his business income loss. In addition, while repairs were in progress, vandals stole some of Sam’s undamaged stock. Sam’s Smoke Shop is insured under a Business Owner’s Coverage Form (BCF) with a $150,000 replacement cost limit on business personal property, meeting the policy’s 80 percent insurance to value provision. The BCF is unendorsed and has a $1,000 deductible. Explain the extent to which, if any, the following losses from this incident will be covered by Sam’s BCF.
    1. Damage to merchandise on display and in storage with a replacement cost of $125,000.
    2. Damage to office equipment with a replacement cost of $2,500.
    3. Business income and extra expense, including the sublet of space in an adjacent store, totaling $22,000.
    4. The undamaged inventory with a replacement cost value of $4,000 stolen by vandals during the period of repairs.
  2. An office building under construction is insured by its owner under the ISO Builders Risk Coverage Form, to which the Causes of Loss-Special Form is attached. Indicate whether each of the following losses would be covered under the policy. If a loss is not covered, explain why:
    1. Building supplies owned by the insured and worth $5,000 were destroyed by vehicle collision while being conveyed on a supplier’s truck to the insured location.
    2. A hailstorm destroyed several trees and plants that the landscaping contractor had just planted at the insured location.
    3. The building collapsed because of faulty construction methods and materials.
  3. Read the Seaside Lobster Pound scenario. Evaluate the loss and the insured’s equipment breakdown coverage to determine the extent to which the loss is covered.
    1. Review the information from the declarations to determine whether anything precludes coverage under the policy.
    2. Review the information from the insuring agreements to determine whether anything precludes or limits coverage.
    3. Review the policy’s conditions to determine whether anything precludes coverage or indicates noncompliance with important policy conditions.
    4. Review the policy’s exclusions to determine whether anything excludes coverage or payment of the full amount for the insured’s loss.
    5. Explain the extent to which Seaside will receive payment under the policy for its losses.
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