9.2 Building and Personal Property Coverage Form (BPP)

The CP 00 10 Insuring Agreement

The Building and Personal Property Coverage Form (CP 00 10) is the most-used ISO commercial property form. It insures three distinct property categories, and the declarations show which categories carry a limit:

• Building — the structure, completed additions, permanently installed fixtures and machinery, and maintenance equipment; outdoor fixtures; and personal property the owner uses to maintain or service the building (appliances, fire extinguishing equipment).
• Your Business Personal Property (BPP) — furniture, fixtures, machinery, stock, leased property the insured must insure, and tenant improvements and betterments the insured made but cannot legally remove.
• Personal Property of Others — covered while in the insured's care, custody, or control; loss is paid to the owner, not the insured.

Coverage Territory and Limits

Coverage applies at the described premises plus property within 100 feet of the premises. Each category carries its own limit shown on the declarations, and the coinsurance percentage is shown there too.

Coverage Extensions and Additional Coverage Sublimits

These apply when an 80 percent or higher coinsurance percentage (or Value Reporting) is shown; many sublimits stack on top of the policy limit.

Note the 30-day limit and the $250,000 / $100,000 caps on Newly Acquired Property — frequently tested.

Coinsurance and the Penalty Formula

Commercial property uses an 80 percent coinsurance requirement by default (90 or 100 percent may be selected for a rate credit). The insured agrees to carry a limit equal to at least the coinsurance percentage times the property value at the time of loss. If they do not, the insurer pays only a proportional share:

Payment = (Limit Carried / Limit Required) x Loss − Deductible

Worked Coinsurance Example

A building worth $500,000 at the time of loss carries 80 percent coinsurance, so the required limit is $400,000. The insured actually carries $300,000. A fire causes a $120,000 loss; the deductible is $1,000.

• Penalty ratio = $300,000 / $400,000 = 0.75
• 0.75 x $120,000 = $90,000
• Minus deductible: $90,000 − $1,000 = $87,000 paid

The insured absorbs the $33,000 shortfall plus the deductible because of underinsurance. Coinsurance never applies to total losses up to the policy limit, and the deductible is subtracted after the coinsurance calculation.

Loss Settlement: ACV vs. Replacement Cost

Unless endorsed otherwise, the BPP settles loss at Actual Cash Value (ACV) — replacement cost minus depreciation. Adding the Replacement Cost option (a check-box on CP 00 10) pays the full cost to repair or replace without depreciation, but only if the property is actually repaired or replaced and the claim is made within a reasonable time. Until then, the insurer pays ACV and the insured later collects the held-back depreciation.

Replacement Cost does not apply to stock the insured sells (valued at selling price less discounts), property of others, or certain antiques and fine arts. Tenant improvements and betterments have their own settlement rule based on the unexpired lease term.

Worked ACV Example

Machinery costs $60,000 new, has a 20-year life, and is 8 years old at the time of total loss.

• Depreciation = (8 / 20) x $60,000 = $24,000
• ACV = $60,000 − $24,000 = $36,000

With Replacement Cost coverage, the insured collects the full $60,000 once the machinery is replaced (subject to limit and deductible).

Deductibles and Vacancy

The BPP applies a flat per-occurrence deductible (commonly $1,000 or more), subtracted after any coinsurance adjustment. Wind/hail or named-storm percentage deductibles may be endorsed in coastal areas.

The Vacancy provision is a frequent exam item. A building is considered vacant when it does not contain enough business personal property to conduct customary operations, and a tenant-occupied building is vacant when leased space is unrented. Once a building has been vacant for more than 60 consecutive days before a loss, the insurer:

• denies loss caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft; and
• reduces payment by 15 percent for all other covered causes of loss.

Tenant Improvements and Betterments

When a tenant pays for fixtures or alterations that legally become part of the landlord's building, the tenant insures them under Your Business Personal Property as improvements and betterments — because the tenant cannot remove them but still has a financial interest in them. This is a classic distinction between the tenant's BPP limit and the owner's Building limit.