Commercial Property Update
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Building and Personal Property Form CP 00 10 10 00

The following sections of the Building and Personal Property Form have been modified:
  • Non Owned Trailer Coverage
  • Debris Removal
  • Increased Cost of Construction
  • Newly Acquired or Constructed Property
  • Personal Effects and Property of Others
  • Property Off Premises
  • Deductible
  • Vacancy
  • Replacement Cost

    Non Owned Trailers
    Non Owned Trailers was added as an "exception" to the "Property Not Covered" under vehicles. Previous edition dates had no automatic provision for coverage.

    There were two reasons for the addition:
  • Many insureds have goods delivered by truck and may be held responsible by the trucking company for damage to or theft of a detached trailer left on the insured's premises for unloading and retrieval.
  • Many insureds who rent detached trailers from others for storage purposes may be held responsible for damage to or theft of the trailers.

    Coverage is now provided under the exception to the Property Not Covered section and clarified in the Coverage Extensions by the addition of paragraph "f"-Non Owned Detached Trailers.

    Coverage applies to non owned detached trailers if these conditions are met:
  • The trailer is used in your business.
  • The trailer is in your care, custody or control at the premises described in the Declarations.
  • You have a contractual responsibility to pay for loss or damage to the trailer.

    The maximum of coverage is $5,000. An additional insurance amount is required. No coinsurance applies to this coverage. Payment will be affected by clarification of the deductible clause and how the Agreed Value option will apply.

    Debris Removal
    There is no material change in the Debris Removal section--only a clarification of debris removal language as to the provisions governing the amount of coverage. That is, examples of coverage were added.

    The excess amount of $10,000 was incorporated in the Additional Coverage section instead of under the Limits of Insurance section of the coverage form.

    Increased Cost of Construction
    In prior edition dates, coverage for Increased Cost of Construction was added by endorsement CP 04 05. The Additional Coverage Section now provides automatic Increased Cost of Construction (ICC).

    Coverage applies when purchasing the replacement cost valuation. ICC coverage applies only to the repair, rebuilding, or replacement of "damaged" parts of the building.

    Coverage is provided for a limit of $10,000 or 5% of the damaged building, whichever is smaller.

    There is no pollution compliance.

    This coverage is in addition to the limit shown.

    Optional endorsement CP 04 05 will remain in effect to provide more comprehensive coverage for Ordinance or Law exposures. Under CP 04 05, coverage can be selected for:
  • Loss in value of the undamaged portion of the building as a result of demolition
  • The cost of demolition
  • The increased cost of rebuilding to code (Coverage C applies to damaged and undamaged property)

    Newly Acquired or Construction Property Coverage Extension
    Newly Acquired or Constructed Property Extensions typically provides coverage for up to 30 days after the property is "acquired" or "construction" begins. The insured must have a building or personal property insured for the extension to apply for the coverage, according to the new lead in language.

    In some geographic areas, due to climate, it is common to pour the foundation of a building in the fall and resume construction in the spring. Thus coverage for the building (the foundation is not considered covered property unless endorsed to the policy) would not be needed until the spring, which is after to 30-day coverage period currently provided.

    The Newly Acquired Extension is revised to:
  • Equate the start of the 30-day coverage with the start of construction of "covered" property
  • Add coverage for Business Personal Property at a newly constructed or acquired building at the insured location
  • Specify that the business personal property itself may be insured property or newly acquired property (e.g. acquisition of another firm's inventory)
  • Make reference to trade shows as "acquired" locations to which the Extension does not apply (current text refers to fairs and exhibitions)
  • Qualify that the Extension does not apply to personal property temporarily in the insured's possession either in the course of installing or performing work on such property or in the course of manufacturing or wholesaling

    Personal Effects and Property of Others
    Personal effects coverage now applies to members and managers of the named insured. This addition refers to LLCs. Prior edition date language does not recognize this new form of business.

    A Limited Liability Company (LLC) combines the characteristics of both partnerships and corporations. Generally, an LLC can be characterized by the following attributes:
  • An LLC is operated by "members" (who are similar to members of a partnership) and "managers" (who are similar to executive officers of a corporation) who are granted statutory immunity from any debt, obligation or liability attached to the company.
  • Similar to partnerships, income generated by an LLC is passed to members who are taxed individually instead of corporately.
  • As with corporations, only the company's assets (not the owners' personal assets) are at risk from business-related lawsuits.

    Property Off Premises
    The Coverage Extension is broadened to include the following off-premises property:
  • Stock
  • Property at a storage location leased mid-term
  • Property at a fair, trade show, or exhibition

    Coverage is provided in the amount of $10,000.

    Deductible Clause
    The first paragraph of the Deductible clause elaborates on the interaction between the deductible clause and Coinsurance Condition in determining loss payment. This clarifies that the deductible is subtracted from the adjusted amount of loss.

    Vacancy
    Under the current Vacancy Condition, vacancy is established (with respect to a building owner's coverage) when 70% or more of the square footage of the building is not rented or not used to conduct customary operations. These criteria recognize that a building owner may occupy the entire building, or may rent part or all of the building to tenants.

    The revised language for Vacancy Condition now states:

    Such building is vacant unless at least 31% of its total square footage is:
    (i) Rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its customary operations; and/or
    (ii) Used by the building owner to conduct customary operations.


    The revisions to Vacancy Condition include:
  • Clarifying that rented space must be used to conduct customary operations
  • Restating the percentage threshold for vacancy under an owner's policy
  • Referencing total square footage
  • Referencing a general lessee, sub-lessee, and building owner in various parts of the condition

    Replacement Cost
    Replacement Cost expressly provides that the same site is not required for replacement, but the replacement cost is limited to the cost that would have been incurred in rebuilding at the original location:

    4. Extension of Replacement Cost to Personal Property of Others
    A. If the Replacement Cost Optional Coverage is shown as applicable in the Declarations, then this Extension may also be shown as applicable. If the Declarations show the Extension as applicable, then Paragraph 3.b (1) of the Replacement Cost Optional Coverage is deleted and all other provisions of the Replacement Cost Optional Coverage apply to replacement cost on personal property of others.

    With respect to replacement cost on the personal property of others, the following limitation applies:

    If an item(s) of personal property of others is subject to a written contract which governs your liability for loss or damage to that item(s), then valuation of that item(s) will be based on the amount for which you are liable under such contract, but not to exceed the lesser of the replacement cost of the property or the applicable Limit of Insurance.

    Furthermore, there is a revision to paragraphs b. and d. of the Replacement Cost Optional Coverage to clarify that:
  • Tenants' improvements and betterments are not considered to be the personal property of others.
  • Certain provisions of the underlying Valuation Condition continue to apply to the valuation of improvements and betterments if the conditions of replacement cost coverage are not met.

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    Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.