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RCCC Loss Exposure Business Owner Policies & Business Personal Property Case Study

RCCC Loss Exposure Business Owner Policies & Business Personal Property Case Study

Question Description

I’m working on a risk management multi-part question and need guidance to help me understand better.

7-1 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 4 categories of loss exposure businesses face that can be prevented or reduced by risk control techniques?
  2. What coverages are typically provided in business-owner policies?
  3. In addition to business personal property owned by the named insured, what does Business Personal Property cover?
  4. What is covered beyond the building itself under BPP coverage? Provide an example.
  5. How is the deductible applied to a loss payment under the BPP?
  6. What is the purpose and application of the Agreed Value optional coverage in the BPP?
  7. What coverages are included in the Broad Form that are not included in the Basic Form?
  8. What does the fire peril cover beyond loss of property actually burned by a fire?
  9. Identify the advantages to the insured of purchasing the Causes of Loss – Special Form.

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7-3 Mini Case Study: Bill owns Bill’s Bike Shop and the two-story retail location that houses his business. The bike shop’s retail operations are conducted on the first floor of the building. The basement has access to a lower-grade alley at the rear, and most deliveries are made through a basement door. Bikes are delivered in cardboard containers and are stored in the basement prior to assembly there and displayed in the first-floor show room. A small repair shop is also located in the basement, where customers’ bikes are kept when repairs take longer than a day or so, usually when Bill has to wait for replacement parts. Bill’s office and conference room, which are a center for volunteer activities when local bike races take place, are located on the second floor. A lunch room and employee restrooms fill out the space on the second floor.

Bill insures the premises under the Building and Personal Property (BPP) Coverage Form and the Causes of Loss-Special Form. Bill has chosen replacement cost coverage on the building and personal property, also including the property of others sometimes present. The declarations page shows replacement cost coverage on the building to be $600,000, personal property coverage to be $300,000, and the property of others to be $20,000. These amounts satisfy the policy’s coinsurance requirements. A $5,000 deductible applies to covered losses. No other coverage applies to the building or its contents. A fire caused severe damage to the building and its contents.

Questions

Explain whether, and for what amount, Bill’s BPP provides coverage for each loss.

  1. Damage to the building that cost $125,000 to repair.
  2. The fire destroyed a professional racing bike that Bill had taken in for repairs. The actual cash value (ACV) of the bike was $7,500. Its replacement cost was $12,000.
  3. The fire damaged the bike shop’s burglar alarm. During the night following the fire, burglars broke through the basement door and stole fifteen unassembled bikes that were still in their cartons. Police believed that the burglars pulled a van into the alley, loaded it up, and left quickly. Bill had paid a total of $4,500 for the bikes, which had a retail value of $6,500.
  4. Bill had purchased and installed a small satellite dish on the side of the shop so he could receive broadcasts of professional bike races. To promote bike sales, he invited customers to view the races, which he projected on a large screen in his conference room. The fire caused $2,000 damage to the satellite dish and its associated wiring.
  5. When Bill set up his conference room and projection system to attract customers, he spared no expense. In fact, on just the furnishings and electronics, he spent more than $35,000 outfitting the room. Explain whether the BPP will pay to restore the conference room to its previous condition.

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