New Hampshire Commercial Property Insurance

Commercial property insurance protects New Hampshire businesses from financial losses due to property damage, business interruption, and related perils.

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (BPP)

The most common commercial property form covers:

Coverage Territory

Typically covers property:

• At described premises (scheduled locations)
• In transit (with appropriate coverage)
• Temporarily at other locations (limited)
• Newly acquired locations (limited period)

Building Coverage

What's Covered

Building Coverage Includes:

• Structure itself (walls, roof, floors)
• Permanently installed fixtures
• Machinery and equipment servicing building
• Additions and extensions
• Attached structures
• Permanently installed floor coverings
• Building equipment and systems (HVAC, plumbing, electrical)

Also Covered (within building coverage):

• Outdoor fixtures (signs, antennas, satellite dishes)
• Personal property used to service building
• Personal property in apartments furnished by landlord
• Floor coverings permanently installed
• Appliances for refrigerating, ventilating, cooking, etc.

What's Excluded

Not Covered by Building:

• Land, water, growing crops
• Contents of building (need BPP coverage)
• Tenant improvements (need tenant's BPP coverage)
• Vehicles licensed for road use
• Property separately described and rated
• Electronic data (need separate coverage)

Business Personal Property (BPP) Coverage

Covered Property

Your BPP Includes:

• Furniture and fixtures not permanently installed
• Machinery and equipment not part of building
• Stock and inventory
• Materials, supplies, and packaging
• All other personal property you own

BPP of Others You May Be Liable For:

• Customer property for service/repair
• Consigned goods
• Leased equipment (if lease requires)

Tenant Improvements and Betterments:

• Alterations, fixtures, improvements made by tenant
• Acquired or made at tenant's expense
• Cannot legally remove at lease end

Valuation Methods

Special Limits of Insurance

Sub-limits apply to certain property:

Solution: Purchase higher limits or separate coverage for property exceeding sublimits.

Exam Tip: Electronic data (software, digital records) has a $2,500 sublimit in standard commercial property policies. Modern businesses need separate cyber or electronic data coverage.

Business Income (BI) Coverage

What Business Income Covers

Coverage Includes:

1. Net Income - Profit that would have been earned
2. Continuing Operating Expenses - Expenses that continue:
   • Payroll (with payroll endorsement)
   • Rent/mortgage payments
   • Utilities
   • Loan payments
   • Other normal expenses

Formula: $\text{Business Income Loss} = \text{Net Income} + \text{Continuing Expenses} - \text{Discontinuing Expenses}$

Coverage Trigger

Business income coverage applies when:

• Direct physical loss to property
• Caused by covered peril
• At described premises
• Suspends operations (partial or total)

Period of Restoration:

• Begins 72 hours after loss (waiting period)
• Continues until property repaired/replaced
• Ends when business could reopen with reasonable speed
• Does NOT require actual reopening

Extended Period of Indemnity

Standard Extension: Coverage continues for limited time after property restored

Purpose: Allow time to:

• Rebuild customer base
• Restore normal business volume
• Overcome competitive disadvantage
• Return to pre-loss income levels

Typical Extension: 30 days after restoration (can purchase longer)

Extra Expense Coverage

Covers costs to:

• Continue operations after loss
• Minimize suspension of business
• Avoid permanent loss of customers

Examples:

• Temporary location rent
• Equipment rental
• Expedited delivery of materials
• Overtime to restore operations
• Temporary staff or contractors

Difference from Business Income:

• BI covers LOST income
• Extra expense covers EXTRA costs to continue

Exam Tip: Business income covers profit and continuing expenses during suspension. Extra expense covers additional costs to continue operating or minimize suspension. Both are essential for business continuity.

Coinsurance in Commercial Property

Coinsurance Requirement

Purpose: Encourages adequate insurance limits

How It Works:

• Policyholder agrees to insure to specified percentage (80%, 90%, 100%)
• If under-insured, becomes co-insurer
• Penalized on ALL losses, not just total losses

Coinsurance Formula

$\text{Payment} = \frac{\text{Insurance Carried}}{\text{Insurance Required}} \times \text{Loss} - \text{Deductible}$

Where:

• Insurance Required = Property Value × Coinsurance Percentage

Coinsurance Examples

Example 1: Adequate Insurance (No Penalty)

• Property value: $1,000,000
• Coinsurance requirement: 80%
• Insurance required: $1,000,000 × 80% = $800,000
• Insurance carried: $900,000 ✓ (exceeds requirement)
• Loss: $200,000
• Deductible: $5,000

Payment: $200,000 - $5,000 = $195,000 (full loss paid)

Example 2: Under-Insurance (Penalty Applied)

• Property value: $1,000,000
• Coinsurance requirement: 80%
• Insurance required: $800,000
• Insurance carried: $600,000 (only 60% of value—UNDER-INSURED)
• Loss: $200,000
• Deductible: $5,000

Payment Calculation: \text{Payment} = \frac{$600{,}000}{$800{,}000} \times $200{,}000 - $5{,}000 = 0.75 \times $200{,}000 - $5{,}000 = $150{,}000 - $5{,}000 = $145{,}000

Result: Insured receives only $145,000 instead of $195,000—a penalty of $50,000 for under-insurance.

Example 3: Maximum Penalty (Policy Limit)

• Same facts as Example 2
• Loss: $800,000 (larger loss)

Payment Calculation: \frac{$600{,}000}{$800{,}000} \times $800{,}000 = $600{,}000

Result: Maximum payment is policy limit ($600,000) minus deductible, even though calculated amount would be higher.

Exam Tip: Coinsurance penalties apply to ALL losses when property is under-insured, not just total losses. Carrying 75% of required coverage means receiving only 75% of any loss amount (up to policy limit).

Agreed Value Option

Solution to Coinsurance Penalty:

How Agreed Value Works:

1. Insurer and insured agree on property value
2. Insurer waives coinsurance requirement
3. Insured pays premium based on agreed value
4. No coinsurance penalty as long as insurance equals agreed value

Requirements:

• Statement of values submitted annually
• Property revalued periodically
• Insurance maintained at agreed amount

Benefits:

• Eliminates coinsurance penalty
• Provides valuation certainty
• Simplifies claims settlement
• Protects against appreciation

Causes of Loss Forms

Basic Form

Covers these named perils only:

Broad Form

Includes all Basic Form perils PLUS:

Also adds coverage for:

• Collapse (from specified causes)
• Breakage of glass (building glass)
• Increased replacement cost coverage options

Special Form (All-Risk)

Most Comprehensive:

• Covers ALL risks of direct physical loss
• EXCEPT those specifically excluded
• Most popular for commercial property
• Broader than Basic or Broad

Exclusions:

• Ordinance or law
• Earth movement (earthquake)
• Government action
• Nuclear hazard
• Utility services (off-premises)
• War and military action
• Water (flood, surface water, sewer backup)
• Fungus, mold, bacteria
• Acts or decisions (delay, loss of market)
• Faulty workmanship
• Wear and tear, deterioration

Exam Tip: Special form is "all-risk" (covers everything not excluded). Basic and Broad forms are "named peril" (cover only listed perils). Special form is broadest but costs more.

New Hampshire Commercial Property Exposures

Winter Weather Risks

New Hampshire businesses face significant winter exposures:

Seasonal Business Risks

Tourism-Dependent Businesses:

• Ski resorts and lodges
• Coastal businesses (summer season)
• Leaf-peeping attractions (fall)
• Holiday retail operations

Business Income Concerns:

• Loss during peak season catastrophic
• Shorter recovery window
• Need adequate BI limits for peak revenue
• Consider seasonal endorsements

Manufacturing and Industrial Risks

New Hampshire's Industrial Base:

• Manufacturing (aerospace, medical devices)
• High-tech/electronics
• Wood products
• Food processing

Special Considerations:

• Equipment breakdown coverage essential
• Supplier contingent business income
• Inland marine for goods in transit
• Pollution liability considerations

Additional Coverages and Extensions

Ordinance or Law Coverage

Problem: Building codes change—rebuilding to current code costs more

Coverage Provides:

• Cost to demolish undamaged portion if required by law
• Increased cost to rebuild to current code
• Loss of undamaged portion if must be demolished

Without This Coverage: Only pay to rebuild to pre-loss condition (may be illegal)

Equipment Breakdown Coverage

Covers mechanical/electrical breakdown:

• Boilers, HVAC systems
• Production equipment
• Computer equipment
• Refrigeration units
• Electrical systems

Benefits:

• Business income loss from breakdown
• Repair/replacement costs
• Expediting expenses
• No deductible on BI portion

Exclusions:

• Fire (covered by property policy)
• Wear and tear
• Lack of maintenance
• Cosmetic damage

Accounts Receivable Coverage

Protects against:

• Loss of records due to covered peril
• Inability to collect outstanding accounts
• Cost to re-create records
• Collection expenses

Essential For:

• Businesses with significant A/R
• Those without electronic backup
• Medical offices, service businesses
• Credit-extending operations

Valuable Papers and Records

Covers cost to:

• Research and reconstruct records
• Replace blueprints, drawings
• Recreate manuscripts, film
• Restore electronic data

Standard Sublimit: $2,500 Increased Limits: Available up to hundreds of thousands

Exam Tip: Standard commercial property policies have $2,500 sublimits for money, valuable papers, accounts receivable, and electronic data. Modern businesses need much higher limits through endorsements or separate policies.

Claims Settlement

Loss Payment Process

Steps:

1. Report Loss Promptly - Notify insurer immediately
2. Protect Property - Prevent further damage
3. Document Loss - Photos, videos, inventory
4. Meet with Adjuster - Provide access and documentation
5. Submit Proof of Loss - Within 60 days (typically)
6. Receive Payment - Within policy timeframes

Duties After Loss

Policyholder Must:

• Give prompt notice to insurer/agent
• Protect property from further damage
• Cooperate with insurer investigation
• Prepare inventory of damaged property
• Submit sworn proof of loss
• Allow property inspection
• Submit to examination under oath if requested
• Provide books and records

Failure to Comply: May jeopardize claim payment

Appraisal Provision

If Parties Disagree on Value:

1. Each party selects competent appraiser
2. Appraisers select neutral umpire
3. Appraisers state loss amount separately
4. If appraisers disagree, umpire decides
5. Agreement by any two binds both parties

Cost: Each party pays their appraiser; split umpire cost

Scope: Determines VALUE only (not coverage)

Exam Tip: The appraisal provision resolves VALUATION disputes only—not coverage disputes. If insurer says loss isn't covered, appraisal doesn't apply; legal action may be needed.