9.2 Building and Personal Property Coverage Form (BPP)

The Three Coverages of CP 00 10

The Building and Personal Property Coverage Form (CP 00 10) is the workhorse commercial property form. It contains three separately scheduled coverages, each with its own limit shown on the declarations:

• Building — the structure, permanently installed fixtures, machinery and equipment, and outdoor fixtures. It also automatically covers maintenance equipment and appliances for refrigerating, cooking, and laundering used to service the building, plus additions and buildings under construction.
• Your Business Personal Property (BPP) — contents the insured owns and uses in the business: furniture, fixtures, stock, machinery not part of the building, leased property the insured must insure, and tenant's improvements and betterments. Property must be in or within 100 feet of the described premises.
• Personal Property of Others — property of others in the insured's care, custody, or control; loss is adjusted with and paid to the owner, not the insured.

A stem that places property 150 feet from the building, in the open, has moved it outside the 100-foot radius — a classic exclusion trap. Likewise, a tenant who installs new flooring covers it under improvements and betterments, not under Building.

Coinsurance: The Most Tested Math

The BPP carries a coinsurance clause, default 80 percent, that requires the insured to carry a limit equal to at least that percentage of the property's value at the time of loss. Insure to less and a partial loss is penalized; the insurer pays only the proportion the insured carried.

Formula: (Did Carry / Should Carry) x Loss − Deductible = Payment (never more than the limit of insurance).

Worked example. A building is worth $500,000 at the time of loss. The 80 percent requirement means the insured should carry $400,000. The insured actually carried $300,000. A fire causes a $100,000 loss; the deductible is $1,000.

• Should carry: $500,000 x 0.80 = $400,000
• Coinsurance ratio: $300,000 / $400,000 = 0.75
• Apply ratio: 0.75 x $100,000 = $75,000
• Less deductible: $75,000 − $1,000 = $74,000 paid

The insured absorbs the remaining shortfall as a penalty for underinsurance. Note: the penalty applies to partial losses only; a total loss simply pays the policy limit (subject to deductible), so a heavily underinsured building still recovers its full limit on a total loss but is badly underprotected.

Valuation: ACV Versus Replacement Cost

The default loss settlement basis on the BPP is Actual Cash Value (ACV) — replacement cost minus depreciation. Replacement Cost (RC) applies only when the declarations show the RC option and the property is actually repaired, rebuilt, or replaced with reasonable speed and similar quality. Until repair or replacement actually occurs, the insurer pays the ACV and the insured collects the depreciation 'holdback' afterward.

Worked ACV example: a roof costs $30,000 to replace new, has a 20-year life, and is 10 years old. Depreciation is 50 percent, so ACV = $30,000 − $15,000 = $15,000. Under ACV settlement the insured nets $15,000 (less deductible); under RC settlement, after replacing the roof, the insured recovers the full $30,000 (less deductible).

Key trap: certain property is always valued at ACV even under an RC policy — stock the insured has not sold, household contents, works of art, and property of others can carry special valuation. Tenant improvements and betterments not yet repaired are valued by a proration based on the lease's unexpired term.

Additional Coverages and Coverage Extensions

The BPP grants limited automatic coverage on top of the scheduled limits.

Additional Coverages (built in, with sublimits):

Coverage Extensions (available when 80% coinsurance or value reporting applies):

• Newly Acquired or Constructed Property — buildings up to $250,000, business personal property up to $100,000, each for 30 days or until reported.
• Personal Effects and Property of Others — up to $2,500.
• Valuable Papers and Records (cost to research/reconstruct) — up to $2,500.
• Property Off-Premises — up to $10,000.
• Outdoor Property (trees, shrubs, plants, fences, signs) — up to $1,000, with a $250 maximum per tree, shrub, or plant.

Exam trap: the Newly Acquired extension is automatic but temporary — it lapses at 30 days unless the insured reports the new location and pays premium, so a stem describing a building bought 45 days ago with no report signals no coverage.

Deductibles, Limits, and Common BPP Traps

The BPP applies a per-occurrence deductible to each loss, subtracted after any coinsurance penalty — never before. Reversing that order is a frequent calculation error: always reduce for coinsurance first, then subtract the deductible.

The limit of insurance is the absolute ceiling. Even when a coinsurance ratio and a sublimit would otherwise pay more, the insurer never pays above the scheduled limit for that coverage. A second trap is treating Additional Coverages as adding to the limit: most (debris removal, pollutant cleanup) are paid within sublimits and partly within the main limit, not stacked on top of a fully exhausted limit.

Watch the vacancy provision as well. If a building has been vacant for more than 60 consecutive days before a loss, the BPP cuts payment by 15 percent for covered perils and excludes entirely vandalism, sprinkler leakage, building glass breakage, water damage, theft, and attempted theft. A stem mentioning a building empty for 70 days is steering you to the vacancy penalty. 'Vacant' for a tenant means nearly empty of contents; for an owner it means less than 31 percent rented or used.