Utah Commercial Property Insurance

Utah's diverse economy - from technology startups to ski resorts to mining operations - creates varied commercial property insurance needs. Understanding commercial property coverage is essential for serving Utah business clients.

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (BPP)

The BPP form covers three categories of commercial property:

Covered Property Specifics

Building Coverage Includes:

• Completed additions
• Fixtures
• Permanently installed machinery and equipment
• Personal property used for maintenance
• Outdoor fixtures

Business Personal Property Includes:

• Furniture and fixtures
• Machinery and equipment
• Stock (inventory)
• All other personal property owned and used in business
• Tenant's improvements and betterments

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Causes of Loss Forms

Commercial property coverage is combined with one of three causes of loss forms:

Basic Form (Most Limited)

Covers only 11 named perils:

• Fire
• Lightning
• Explosion
• Smoke
• Windstorm or hail
• Riot or civil commotion
• Aircraft
• Vehicles
• Vandalism
• Sprinkler leakage
• Sinkhole collapse
• Volcanic action

Broad Form

Covers Basic Form perils PLUS:

• Falling objects
• Weight of snow, ice, or sleet
• Water damage (from plumbing, not flood)

Special Form (Broadest)

Open perils coverage - covers all causes of loss EXCEPT those specifically excluded.

Exam Tip: Special form provides the broadest coverage. The INSURER must prove an exclusion applies to deny a claim.

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Business Income Coverage

What It Covers

Business income coverage pays for:

• Lost net income during period of restoration
• Continuing normal operating expenses
• Expenses to reduce the loss (extra expense)

Formula for Business Income Loss

Business Income Loss = Lost Revenue - Saved Expenses

Period of Restoration

Coverage applies from:

• Start: When damage occurs from covered cause
• End: When property should be repaired with reasonable speed, or when business resumes at new location

Extra Expense Coverage

Pays for expenses BEYOND normal operating expenses to:

• Continue operations during restoration
• Minimize business income loss
• Relocate temporarily

Example:

• Normal rent: $2,000/month
• Temporary location rent: $4,000/month
• Extra expense: $2,000/month

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Coinsurance in Commercial Property

How Coinsurance Works

The coinsurance clause requires the insured to maintain coverage equal to a specified percentage of the property's value.

Common Coinsurance Percentages:

• 80% (most common)
• 90%
• 100%

Coinsurance Formula

Payment = (Amount Carried / Amount Required) × Loss - Deductible

Amount Required = Property Value × Coinsurance Percentage

Coinsurance Example

Calculation:

• Amount required: $1,000,000 × 80% = $800,000
• Ratio: $600,000 / $800,000 = 75%
• Payment: 75% × $200,000 = $150,000

The insured only receives $150,000 of a $200,000 loss - a $50,000 penalty!

Avoiding Coinsurance Penalty

1. Carry adequate limits - At least 80% of property value
2. Agreed Value option - Pre-agree on value with insurer
3. Regular appraisals - Keep coverage updated with value changes
4. Inflation Guard - Automatic increases to keep pace

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Utah-Specific Commercial Considerations

Earthquake Coverage for Utah Businesses

Business Income Impact:

• Extended restoration periods
• Supply chain disruptions
• Customer loss during closure

Ski Resort and Tourism Coverage

Utah's $10+ billion tourism industry faces unique risks:

Technology Sector Coverage

Utah's growing tech industry ("Silicon Slopes") needs:

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Common Commercial Property Exclusions

Utah Consideration: Given earthquake risk along the Wasatch Front, earthquake coverage endorsement is essential for most Utah commercial properties.

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Valuation Methods

Replacement Cost

Pays cost to replace property with new property of like kind and quality, without depreciation.

Best For:

• Newer buildings
• Critical business equipment
• Properties to be repaired/replaced

Actual Cash Value

Replacement cost MINUS depreciation.

ACV = Replacement Cost - Depreciation

Functional Replacement Cost

Pays to replace with property that performs the same function, even if not identical.

Best For:

• Older buildings with obsolete features
• Historic properties
• When exact replacement is impractical