9.2 Building and Personal Property Coverage Form (BPP)
Key Takeaways
- The BPP (CP 00 10) insures three categories: Building, Your Business Personal Property, and Personal Property of Others — each needs a limit ('X') to be covered.
- Default valuation is ACV (Replacement Cost minus Depreciation); Replacement Cost is an optional coverage paid only upon actual repair/replacement.
- Coinsurance penalty = (did carry ÷ should carry) × loss, then subtract the deductible; underinsurance shifts part of the loss to the insured.
- Coverage Extensions (Newly Acquired Buildings $250k, BPP $100k, Off-Premises $10k) require 80% coinsurance.
- Four Optional Coverages: Agreed Value (suspends coinsurance), Inflation Guard, Replacement Cost, and RC for Personal Property of Others.
The Workhorse of Commercial Property: CP 00 10
The Building and Personal Property Coverage Form (BPP), ISO form CP 00 10, is the most commonly used commercial property coverage form. The declarations assign a limit of insurance to each of three coverage categories, and coverage applies only where an "X" (a limit) is shown for that item at that location:
- Building — the structure, completed additions, permanently installed fixtures/machinery/equipment, and outdoor fixtures. Also includes personal property the landlord uses to maintain the building (appliances for refrigeration, ventilation, cooking; fire-extinguishing equipment; floor coverings).
- Your Business Personal Property (BPP) — contents the insured owns and uses in business: furniture, fixtures, machinery, stock, and the insured's use interest in improvements & betterments to a rented space.
- Personal Property of Others — property of others in the insured's care, custody, or control (loss is paid to the owner).
Covered Costs, Property Not Covered, and the Coverage Extensions
The BPP automatically includes additional coverages such as Debris Removal, Preservation of Property, Fire Department Service Charge, and Pollutant Cleanup and Removal. It also provides Coverage Extensions when the insured carries 80% coinsurance, including:
| Extension | Typical limit |
|---|---|
| Newly Acquired Buildings | up to $250,000 each |
| Newly Acquired Business Personal Property | up to $100,000 each location |
| Personal Effects & Property of Others | $2,500 per location |
| Valuable Papers & Records (cost to research) | $2,500 per location |
| Property Off-Premises | $10,000 |
| Outdoor Property (trees, shrubs, signs) | $1,000 / $250 per tree-shrub-plant |
Property Not Covered includes money/securities (use crime coverage), land, water, growing crops, vehicles licensed for road use, and the cost to excavate.
Loss Valuation and the Coinsurance Penalty
The BPP values losses at Actual Cash Value (ACV) by default. ACV = Replacement Cost − Depreciation. The insured may select Replacement Cost valuation via the Optional Coverages, but RC is paid only when the property is actually repaired or replaced; otherwise the loss is settled at ACV.
The BPP carries a coinsurance clause, usually 80%, 90%, or 100%. The penalty formula is:
(Did carry ÷ Should have carried) × Loss − Deductible = Payment
Worked example: A building valued at $500,000 carries 80% coinsurance, so the insured should carry $400,000. They actually carry $300,000. A fire causes a $100,000 loss with a $1,000 deductible:
($300,000 ÷ $400,000) × $100,000 = 0.75 × $100,000 = $75,000, minus $1,000 = $74,000.
The insured absorbs the $25,000 coinsurance penalty plus the deductible because they were underinsured.
A building is worth $500,000 and the policy carries an 80% coinsurance clause. The insured carries $300,000 of insurance. A covered loss is $100,000 with a $1,000 deductible. How much does the insurer pay?
Optional Coverages and Improvements & Betterments
The BPP's four Optional Coverages, activated by an entry in the declarations, are Agreed Value (suspends coinsurance), Inflation Guard (automatically increases the limit by a stated annual percentage), Replacement Cost, and Extension of Replacement Cost to Personal Property of Others.
A frequent trap involves Improvements & Betterments — permanent additions a tenant makes to a leased space. The tenant insures them as Your Business Personal Property. If destroyed and not replaced, the tenant recovers the unexpired portion of the original cost based on the remaining lease term (a proration), not full replacement cost — unless RC valuation applies and the tenant replaces them.
Reading the BPP Declarations and the Deductible
The BPP declarations are where the exam hides facts. Each location and building gets a separate line, and coverage applies only against the limit shown. A single flat deductible (commonly $500–$2,500) applies per occurrence, subtracted after any coinsurance penalty — order matters. Worked sequence: a $50,000 loss with a 0.80 coinsurance result of $40,000 settled value, less a $1,000 deductible, pays $39,000; you never subtract the deductible first.
Other tested mechanics:
| Provision | Rule |
|---|---|
| Coinsurance order | Apply penalty first, then subtract deductible |
| Mortgageholder clause | Mortgagee paid even if insured's act voids coverage; may pay premium and file proof of loss |
| Vacancy provision | Loss reduced 15% (or denied for certain perils) if building vacant beyond 60 consecutive days |
| No benefit to bailee | Coverage does not benefit a carrier holding the property |
The 60-day vacancy rule and the mortgageholder protections are repeat exam items.
What the BPP Covers: Three Property Categories
The Building and Personal Property Coverage Form (CP 00 10) insures three categories the exam expects you to distinguish. Building includes the structure, completed additions, permanently installed fixtures and equipment, and outdoor fixtures, plus property used to maintain the building (such as fire-extinguishing and air-conditioning equipment).
Your Business Personal Property (BPP) includes furniture, machinery, stock, and the insured's tenant's improvements and betterments, covered while in or on the building or within 100 feet of the premises. Personal Property of Others in the insured's care, custody, or control is covered, but loss is paid to the owner, not the insured.
The form provides several additional coverages within or beyond the limit, including debris removal (typically 25 percent of the loss plus a further amount if needed), preservation of property removed to protect it from loss, fire department service charges, and pollutant cleanup and removal subject to an annual aggregate. Coverage extensions add limited amounts for newly acquired property, personal effects, valuable papers, outdoor property, and property off-premises, each with its own sublimit.
Valuation defaults to actual cash value unless the replacement-cost option is elected on the declarations, and the form carries the standard 80 percent coinsurance unless agreed value or a higher percentage is selected. The interaction of valuation, coinsurance, and the deductible follows the same value-coinsurance-deductible-limit sequence used throughout property insurance.
Worked scenario: a tenant installs $30,000 of permanent shelving (improvements and betterments) and stocks $90,000 of inventory. A fire destroys both. The shelving and inventory are paid under Your Business Personal Property, while a neighbor's goods stored on consignment would be paid under Personal Property of Others to that owner. Sorting property into building, the insured's BPP, or others' property is the central BPP coverage skill.
Key Takeaways
The Building and Personal Property form covers building (structure and permanently installed equipment), the insured's business personal property (including tenant's improvements and betterments, within 100 feet), and personal property of others (paid to the owner). Additional coverages and extensions add debris removal, preservation, and limited newly acquired and off-premises amounts. Valuation defaults to ACV with 80 percent coinsurance, settled by applying coinsurance before the deductible, and the 60-day vacancy and mortgageholder rules recur on the exam.
Which BPP Optional Coverage suspends the coinsurance requirement for the policy term when the insured submits a current statement of values?