Key Takeaways
- The BPP Coverage Form has THREE categories: Coverage A (Building), Coverage B (Business Personal Property), and Coverage C (Personal Property of Others).
- COVERAGE EXTENSIONS provide automatic additional coverage for items like newly acquired property (up to $250,000 for 30 days) and outdoor property (up to $1,000).
- The difference between REPLACEMENT COST and ACTUAL CASH VALUE is critical—ACV deducts depreciation while RC does not.
- Business personal property includes furniture, machinery, stock, and improvements made by tenants (tenant improvements and betterments).
- The 80% COINSURANCE clause requires insured to carry at least 80% of property value or face a penalty at claim time.
Building and Personal Property Coverage Form
Overview
The Building and Personal Property (BPP) Coverage Form is the most common commercial property form. It covers buildings, business personal property, and personal property of others in the insured's care.
Three Categories of Covered Property
Coverage A: Building
Covers the building(s) described in the declarations, including:
| Included | Examples |
|---|---|
| Permanent fixtures | Built-in cabinets, lighting fixtures |
| Permanently installed machinery | HVAC, elevators, fire suppression |
| Outdoor fixtures | Light poles, flagpoles attached to building |
| Personal property used to service the building | Appliances, fire extinguishers, floor coverings |
| Additions under construction | Building expansions in progress |
Coverage B: Business Personal Property
Covers property owned by the insured and used in the business:
| Category | Examples |
|---|---|
| Furniture and fixtures | Desks, chairs, shelving |
| Machinery and equipment | Computers, manufacturing equipment |
| Stock | Inventory, raw materials, finished goods |
| Tenant improvements and betterments | Upgrades made by tenant to leased space |
| Leased personal property | Equipment leased by insured |
Coverage C: Personal Property of Others
Covers property of others in the insured's care, custody, or control:
- Customer property being repaired
- Goods held on consignment
- Property of employees on premises
Important: This is NOT the same as bailee coverage—Coverage C has limited applicability.
Coverage Extensions
Coverage extensions provide additional coverage without additional premium, subject to limits:
| Extension | Limit | Duration/Notes |
|---|---|---|
| Newly Acquired or Constructed Property | $250,000 buildings / $100,000 BPP | 30 days |
| Personal Effects and Property of Others | $2,500 | At described premises |
| Valuable Papers and Records | $2,500 | Cost of research/restoration |
| Property Off-Premises | $10,000 | Temporarily removed |
| Outdoor Property | $1,000 ($250 per item) | Fences, signs, antennas |
| Non-Owned Detached Trailers | $5,000 | Under insured's control |
Key Rule: Coverage extensions only apply if at least 80% coinsurance is shown in declarations (or a value reporting form applies).
Additional Coverages
These coverages are included automatically:
Debris Removal
- Covers cost to remove debris after covered loss
- Limit: 25% of loss amount + deductible
- Additional $25,000 if 25% is insufficient
Preservation of Property
- Covers property while being moved to prevent loss
- Applies for 30 days after removal
Fire Department Service Charge
- Up to $1,000 for fire department charges
- No deductible applies
Pollutant Cleanup and Removal
- Up to $10,000 per 12-month period
- Must result from covered cause of loss
Increased Cost of Construction
- Covers additional cost due to building code changes
- Requires endorsement for full coverage
Valuation Methods
| Method | Definition | When Used |
|---|---|---|
| Actual Cash Value (ACV) | Replacement cost MINUS depreciation | Default valuation |
| Replacement Cost (RC) | Cost to repair/replace with like kind and quality | With RC endorsement |
| Functional Replacement Cost | Cost to replace with functionally equivalent property | Outdated buildings |
| Agreed Value | Pre-agreed amount, suspends coinsurance | Valuable/unique property |
ACV vs. Replacement Cost Example
| Factor | ACV | Replacement Cost |
|---|---|---|
| Replacement cost of roof | $50,000 | $50,000 |
| Less: Depreciation (10 years × 3%) | -$15,000 | $0 |
| Claim Payment | $35,000 | $50,000 |
Property NOT Covered
The BPP form specifically excludes:
- Accounts, bills, currency, money, securities (except as extension)
- Animals (unless owned by others and boarded)
- Automobiles held for sale
- Bridges, roadways, walks, patios (outdoors)
- Contraband or property in illegal trade
- Land, water, growing crops
- Underground pipes, flues, drains
- The cost of excavations, grading, filling
- Electronic data (except as provided)
Under the BPP Coverage Form, for how many days is newly acquired property automatically covered before it must be reported to the insurer?
What is the maximum coverage provided for outdoor property under the BPP coverage extensions?
Which of the following is considered Tenant Improvements and Betterments under Coverage B?
7.3 Causes of Loss Forms
Continue learning