9.2 Building and Personal Property Coverage Form (BPP)

The BPP Coverage Form

The Building and Personal Property Coverage Form (BPP), ISO form CP 00 10, is the most widely used commercial property form. It provides three distinct coverages, and the insured selects a limit for each on the declarations:

• Coverage A — Building: the structure, permanently installed fixtures, machinery, equipment, and additions. Also includes outdoor fixtures and maintenance equipment used to service the building.
• Coverage B — Your Business Personal Property (BPP): the insured's furniture, stock, machinery, and tenant Improvements and Betterments.
• Coverage C — Personal Property of Others: property of others in the insured's care, custody, or control.

Tenant Improvements and Betterments

Improvements and Betterments are alterations a tenant makes to a leased space — built-in shelving, a custom storefront, upgraded lighting. They legally become part of the building, but because the tenant paid for them, they are insured under Coverage B (Business Personal Property), not Coverage A.

Exam trap: Students assume anything attached to the building is Coverage A. For a tenant's leased improvements, the answer is Coverage B. The landlord, by contrast, insures the building itself under Coverage A.

Valuation: ACV vs. Replacement Cost

Unless the declarations show otherwise, the BPP pays losses on an Actual Cash Value (ACV) basis. ACV equals replacement cost minus depreciation. A 10-year-old roof with a 20-year life that costs $40,000 to replace would pay roughly $20,000 on an ACV basis (50 percent depreciated).

The insured may instead select the Replacement Cost optional coverage, which pays the cost to repair or replace with like kind and quality, without deduction for depreciation — provided the property is actually repaired or replaced and the limit is adequate.

The Coinsurance Clause

The BPP contains a coinsurance clause (commonly 80, 90, or 100 percent) that requires the insured to carry a limit equal to at least that percentage of the property's full value. Underinsuring triggers a penalty on partial losses:

Recovery = (Limit Carried ÷ Limit Required) × Loss − Deductible

Worked Example

A building is worth $500,000 with an 80% coinsurance clause, so the required limit is $400,000. The insured carries only $300,000 and has a $50,000 fire loss with a $1,000 deductible:

• Did/Should = $300,000 ÷ $400,000 = 0.75
• 0.75 × $50,000 = $37,500
• Less $1,000 deductible = $36,500 paid

The insured absorbs the shortfall as a self-penalty for underinsuring.

Coverage Extensions

When 80 percent or higher coinsurance is shown, the BPP adds limited coverage extensions at no additional premium:

These extensions are additional insurance and do not reduce the policy limit.

Additional Coverages

Separate from the extensions, the BPP also grants several additional coverages built into the form:

• Debris Removal — pays up to 25 percent of the loss plus deductible, with an extra $25,000 available when debris cost is high.
• Preservation of Property — covers property moved to safety from an impending covered loss, for up to 30 days.
• Fire Department Service Charge — up to $1,000 with no deductible.
• Pollutant Cleanup and Removal — up to $10,000 per year when cleanup results from a covered loss.

These run automatically and are commonly tested for their specific dollar caps.

What Is Not Covered Property

The BPP defines covered property but also lists property not covered, which surprises candidates:

• Money, accounts, securities, and bills (covered under crime forms instead)
• Automobiles held for sale and licensed vehicles (covered under auto forms)
• Land, water, growing crops, and lawns
• Outdoor signs not attached to the building (limited)
• Foundations below the lowest floor or ground

Exam trap: Money and securities are NOT business personal property under the BPP — they belong in a crime coverage part. Vehicles licensed for road use belong in a commercial auto policy.

Replacement Cost Recovery Mechanics

When the replacement-cost option is elected, the insurer initially pays only the ACV amount and withholds depreciation until the insured actually repairs or replaces the property. The holdback is then released.

Worked example: A $40,000 roof depreciated 50 percent pays $20,000 first. Once the insured completes a like-kind replacement, the remaining $20,000 (the depreciation holdback) is released, up to the policy limit. If the insured chooses not to rebuild, recovery stays at ACV. This claims-handling sequence is a frequent exam item.

BPP Coinsurance Worked Example

The BPP carries a coinsurance clause (commonly 80%, 90%, or 100%). A building has a replacement cost of $500,000 and the insured carries $320,000 under an 80% coinsurance clause with a $2,500 deductible. The required amount is 80% × $500,000 = $400,000. The penalty fraction is $320,000 / $400,000 = 0.80. On a $100,000 loss the insurer pays (0.80 × $100,000) − $2,500 = $77,500, and the insured absorbs the rest for being underinsured.

Had the insured carried the required $400,000, the loss would pay $100,000 − $2,500 = $97,500. The coinsurance penalty applies to partial losses; a total loss simply pays the policy limit.

Coverage Extensions and the Reporting Trap

The BPP grants automatic coverage extensions that do not require a separate limit, such as Newly Acquired or Constructed Property (typically up to $250,000 building / $100,000 BPP for 30 days), Personal Property of Others, Outdoor Property (limited), and Property Off-Premises. These are subject to the coinsurance condition. A frequent trap: the newly-acquired extension is temporary — the insured must report the new location and pay premium within the time limit (commonly 30 days) or coverage lapses. Producers should calendar these reporting deadlines for growing accounts.