9.2 Building and Personal Property Coverage Form (BPP)

The BPP Coverage Form (CP 00 10)

The Building and Personal Property Coverage Form, ISO form CP 00 10, is the workhorse of commercial property. It insures three coverage categories, each triggered only if a limit is shown on the declarations:

• Coverage A — Building: the structure, permanently installed fixtures and machinery, and outdoor fixtures. It also includes maintenance equipment and, if not covered elsewhere, additions under construction.
• Coverage B — Your Business Personal Property (BPP/contents): furniture, stock, machinery not part of the building, and the insured's interest in tenant improvements.
• Coverage C — Personal Property of Others: property of others in the insured's care, custody, or control; loss is payable to the owner, not the insured.

Coverage Extensions and Limits

The BPP automatically grants several extensions when the insured carries 80 percent coinsurance or higher. Memorize the default dollar caps — they are heavily tested:

Newly acquired property is covered for up to 30 days or until the policy expires — whichever comes first — and the insured must report and pay premium from the acquisition date.

The Coinsurance Clause — Worked Math

The BPP includes a coinsurance condition that penalizes underinsurance. The recovery formula:

Payment = (Limit carried ÷ Limit required) × Loss − Deductible, capped at the policy limit.

The required amount equals the coinsurance percentage (often 80%, 90%, or 100%) times the property value at the time of loss.

Example. A building is worth $1,000,000 and carries 80% coinsurance, so the required limit is $800,000. The insured bought only $600,000. A fire causes a $200,000 loss with a $1,000 deductible.

• Coinsurance factor = 600,000 ÷ 800,000 = 0.75
• 0.75 × 200,000 = 150,000
• Less deductible: 150,000 − 1,000 = $149,000 paid

The insured absorbs the $51,000 shortfall as a penalty for underinsuring.

Valuation: ACV vs. Replacement Cost

Unless replacement cost is elected on the declarations, the BPP settles losses at Actual Cash Value (ACV) — replacement cost minus depreciation.

Example. A 10-year-old roof costs $30,000 to replace and has a 20-year life, so it is 50% depreciated. ACV = 30,000 − 15,000 = $15,000.

With the Replacement Cost option (CP 00 10 election or endorsement), the insurer pays the full replacement cost but only after repair/replacement is actually completed; until then it pays ACV. Replacement cost does not apply to stock (unless 'selling price' is selected), Personal Property of Others, manuscripts, or works of art.

Deductibles and the Standard Mortgage Clause

The BPP applies a flat per-occurrence deductible (commonly $1,000 or $2,500), subtracted once per loss regardless of how many coverages are involved. Wind/hail or named-storm losses may carry a separate percentage deductible in catastrophe-prone states.

The Mortgageholder condition (a standard mortgage clause) protects the lender even when the insured's own act voids coverage: the mortgageholder is still paid if it had no knowledge of the increased hazard, pays premium on demand, and submits proof of loss. On payment, the insurer gains subrogation rights against the insured up to the amount paid — a routinely tested distinction from a simple loss-payable clause, which gives the lender no independent rights.

Optional Coverages on CP 00 10

Four options can be activated on the declarations:

1. Agreed Value — suspends coinsurance if the insured files a statement of values and carries that amount.
2. Inflation Guard — automatically increases the limit by a stated annual percentage, applied pro rata.
3. Replacement Cost — settles at RC instead of ACV.
4. Extension of Replacement Cost to Personal Property of Others.

A common trap: Agreed Value suspends coinsurance — it does not eliminate the need to insure to value, because the agreed amount must reflect the reported values or recovery is prorated.

Vacancy and Other Conditions

The BPP Vacancy condition reduces or denies recovery when a building has been vacant for more than 60 consecutive days before a loss. The insurer pays nothing for vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft, and reduces all other covered losses by 15 percent. A building is 'vacant' when it holds less than 31 percent of its rentable area in use; under-construction buildings are not treated as vacant. Examiners pair this with a scenario where a tenant moved out three months earlier — recovery for a fire would be cut 15 percent.

What the BPP Insures: Three Property Categories

The Building and Personal Property Coverage Form (CP 00 10) insures three categories the insured selects on the declarations: Building (the structure, fixtures, permanently installed machinery and equipment, and additions), Your Business Personal Property (furniture, stock, machinery, and other contents the insured owns used in the business), and Personal Property of Others in the insured's care, custody, or control. Each is a separate coverage with its own limit, and an item insured under one category is not automatically insured under another, so matching the damaged property to the correct category is the first analytical step.

The Coverage Extensions and Additional Coverages

The BPP adds Additional Coverages (debris removal, preservation of property, fire department service charge, pollutant cleanup and removal with an annual sublimit, and increased cost of construction on a limited basis) and Coverage Extensions that apply only when the insured carries at least 80 percent coinsurance: newly acquired or constructed property (for a limited period and amount), personal property off premises, outdoor property (with per-tree/shrub sublimits), valuable papers and records, and property at undescribed premises in transit.

These extensions provide automatic but capped coverage, and the exam tests their sublimits and the 80 percent precondition.

Valuation and Optional Coverages

The BPP default valuation is actual cash value, but the insured may elect Optional Coverages on the declarations: Replacement Cost (settling without depreciation), Agreed Value (suspending coinsurance based on a filed statement of values), and Inflation Guard (automatically increasing limits during the term). Replacement cost requires actual repair or replacement to collect the full amount; until then, ACV is paid. Stock that is sold may be valued at selling price under a manufacturer's or retailer's selling-price endorsement, an important nuance for finished-goods inventories.

Coinsurance and a Worked BPP Settlement

The BPP applies coinsurance, commonly 80, 90, or 100 percent. Suppose a business insures its building for 800,000 dollars under an 80 percent clause, but the building's replacement cost at loss is 1,200,000 dollars, so the required amount is 960,000. A 300,000-dollar fire loss with a 1,000-dollar deductible settles as 800,000 / 960,000 = 0.8333, times 300,000 = 250,000, less 1,000 = 249,000 dollars. The insured bears the 50,000-dollar coinsurance penalty for under-insuring. Recognizing the value at the time of loss, computing the required amount, applying the ratio, and subtracting the deductible is the precise sequence the exam rewards.