2.3 Dwelling and Commercial Property Coverage

The Dwelling Policy (DP-1, DP-2, DP-3)

The dwelling policy insures residential buildings that do not qualify for, or do not need, a full homeowners package — rental houses, seasonal homes, dwellings under construction, or non-owner-occupied property. Unlike the HO forms, a dwelling policy contains no automatic personal liability or medical payments; those must be added by endorsement or a separate Comprehensive Personal Liability policy. There are three forms:

Dwelling coverages parallel the HO structure: Coverage A — Dwelling, Coverage B — Other Structures, Coverage C — Personal Property, Coverage D — Fair Rental Value, and Coverage E — Additional Living Expense. DP-2 and DP-3 automatically include the loss-of-use coverages; DP-1 includes fair rental value but adds ALE by endorsement. DP-3 is the residential parallel to HO-3.

A tested wrinkle is extended coverage (EC) and vandalism and malicious mischief (V&MM): under the older DP-1, only fire, lightning, and internal explosion are covered automatically, and the EC perils (windstorm, hail, explosion, riot, aircraft, vehicles, smoke) plus V&MM are added by endorsement or premium. Dwelling forms are the typical choice for landlords insuring rental houses because they let the owner buy building coverage and fair rental value without paying for contents or homeowners-level liability they do not need.

The Commercial Package Policy (CPP)

Commercial insureds assemble coverage through a Commercial Package Policy (CPP). The CPP is modular: a single Common Policy Declarations and Common Policy Conditions bind together two or more coverage parts, such as:

• Commercial Property
• Commercial General Liability (CGL)
• Commercial Crime
• Inland Marine
• Commercial Auto
• Boiler and Machinery (Equipment Breakdown)
• Farm

Packaging earns a package discount versus buying each line separately (a monoline policy) and avoids coverage gaps. Each coverage part keeps its own coverage form, declarations, and conditions, but the common conditions (cancellation, transfer of rights, examination of books) apply across all of them.

Building and Personal Property Coverage Form (BPP)

The heart of the commercial property part is the Building and Personal Property Coverage Form (BPP, ISO form CP 00 10). It offers three separate insurable interests, each with its own limit:

1. Building — the structure, fixtures, permanently installed machinery, and completed additions.
2. Your Business Personal Property (BPP/contents) — furniture, stock, machinery, and equipment the insured owns and uses in the business.
3. Personal Property of Others — customers' or others' property in the insured's care, custody, or control.

The BPP carries a coinsurance clause (commonly 80%, 90%, or 100%), so the coinsurance formula from Section 2.1 applies. An agreed value option can suspend it. The BPP also includes additional coverages (debris removal, preservation of property, fire department service charge, pollutant cleanup) and coverage extensions (newly acquired property, personal effects, outdoor property, valuable papers), each with its own sublimit. Optional loss-settlement choices on the BPP include replacement cost (in place of the default ACV), agreed value, and inflation guard to keep limits current.

Causes-of-Loss Forms and Commercial Property Conditions

The BPP says what is covered; a separate causes-of-loss form says which perils are covered, mirroring Section 2.1:

• Basic Causes of Loss (CP 10 10) — named perils: fire, lightning, explosion, smoke, windstorm/hail, riot, aircraft/vehicles, vandalism, sprinkler leakage, sinkhole, volcanic action.
• Broad Causes of Loss (CP 10 20) — Basic plus falling objects; weight of snow/ice/sleet; water damage; glass breakage; and collapse as an additional coverage.
• Special Causes of Loss (CP 10 30) — open-peril: all direct physical loss except stated exclusions; the broadest, and it shifts the burden of proof to the insurer.

The Commercial Property Conditions form (CP 00 90) adds conditions that apply to the whole property part: concealment/misrepresentation/fraud, control of property, insurance under two or more coverages, legal action against the insurer, liberalization, no benefit to bailee, other insurance, policy period/coverage territory, and transfer of rights of recovery (subrogation).

Business Income, Extra Expense, and the BOP

Direct property forms pay for physical damage; time-element coverage pays for the income consequences:

• Business Income Coverage (CP 00 30 / CP 00 32) replaces lost net income plus continuing normal operating expenses (including payroll) the insured would have earned had no loss occurred. It applies during the period of restoration — beginning when the direct loss occurs and ending when the property should be repaired or replaced with reasonable speed, subject to any extended business income period. A covered direct loss must trigger it.
• Extra Expense Coverage (CP 00 50) pays the additional costs to keep operating after a loss — renting temporary space, leasing equipment, expediting repairs — expenses that would not have arisen absent the loss. Business income and extra expense are often written together.

For small and mid-sized businesses, the Businessowners Policy (BOP) bundles commercial property and liability into one streamlined contract. Distinguishing BOP features the exam tests:

• Business income/extra expense is automatically included — and, importantly, the BOP has no coinsurance requirement.
• Eligibility is restricted by size (limits on square footage, stories, and annual revenue) and class — typically offices, retail stores, apartments, and small service risks; manufacturers and large/high-hazard risks are ineligible and use a CPP instead.

The BOP is to commercial what the HO package is to personal lines: a pre-bundled, simplified product for standard, smaller risks, while the CPP is the flexible, build-your-own program for larger or specialized accounts.