9.2 Building and Personal Property Coverage Form (BPP)

The Core Commercial Property Form

The Building and Personal Property Coverage Form (CP 00 10) is the workhorse of commercial property. It insures three categories of covered property, each listed separately on the declarations so the insured chooses limits for each.

• Building — the structure, completed additions, permanently installed fixtures/machinery/equipment, and personal property used to maintain the building (appliances, fire-extinguishing equipment, outdoor furniture).
• Your Business Personal Property (BPP) — contents the insured owns: furniture, stock, machinery not part of the building, and the insured's labor/materials on others' property.
• Personal Property of Others — in the insured's care, custody, or control; loss is paid to the owner, not the insured.

Additional Coverages and Coverage Extensions

The BPP grants small built-in limits. Coverage Extensions typically require the insured to carry 80% coinsurance to apply; Additional Coverages generally do not.

Coinsurance and the Penalty Formula

Most BPP losses are settled subject to a coinsurance clause (commonly 80%, 90%, or 100%). If the insured carries less than the required percentage of the property's value, a penalty reduces the partial-loss payment:

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

Worked example: A building worth $1,000,000 has an 80% coinsurance clause, so the required limit is $800,000. The insured carries only $600,000. A $200,000 partial loss with a $1,000 deductible settles as:

• Required limit = 0.80 × $1,000,000 = $800,000
• Ratio = $600,000 / $800,000 = 0.75
• Payment = 0.75 × $200,000 = $150,000 − $1,000 = $149,000

The insured absorbs the $50,000 coinsurance penalty plus the deductible. Coinsurance never increases payment above the policy limit, and a total loss pays the full limit (no penalty up to the limit).

Valuation: ACV vs. Replacement Cost

The BPP pays Actual Cash Value (ACV) unless Replacement Cost is elected on the declarations. ACV = Replacement Cost − Depreciation.

Worked example: A 10-year-old roof costs $30,000 to replace and has a 20-year life. Depreciation = 50%, so ACV = $15,000. Under replacement cost, the insurer pays the full $30,000 — but only after repair/replacement; until then it pays ACV and the insured collects the holdback when work is done.

Vacancy Provision Trap

If a building is vacant beyond 60 consecutive days, the insurer denies loss from vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft, and reduces all other covered losses by 15%.

Property Not Covered and Off-Premises Limits

The BPP names specific property not covered, which the exam likes to test as exclusions in disguise: money and securities (covered under crime forms instead), accounts/bills/records (covered as Valuable Papers), land/water/growing crops, animals (unless boarded or held for sale and killed by a covered peril), automobiles held for sale, the cost to research lost data, and outdoor signs (subject to a separate sign endorsement). Bridges, roadways, walks, and other paved surfaces are also excluded as Building property unless specifically added.

A frequent trap pairs money with a property loss: a fire destroys $5,000 in cash in the register; the BPP pays nothing for the cash because money is property not covered — that exposure belongs on a commercial crime coverage part. Likewise, electronic data is not tangible covered property except for a small Additional Coverage limit (commonly $2,500).

Deductibles and the Optional Coverages

The BPP applies a flat per-occurrence deductible (default $1,000, but selectable) subtracted after coinsurance. The form also offers four Optional Coverages on the declarations: Agreed Value (suspends coinsurance), Inflation Guard (auto-increases limits), Replacement Cost (elects RC valuation, optionally including or excluding personal property of others and stock), and Extension of Replacement Cost to Personal Property of Others.

Worked example: a covered windstorm causes $120,000 of building damage; the building is fully insured to the 80% requirement, so no coinsurance penalty applies. With a $2,500 deductible, the insurer pays $117,500. If the same insured had selected a $5,000 deductible for a lower premium, the recovery would drop to $115,000 — illustrating the deductible/premium trade-off underwriters and agents weigh.

What the BPP Insures

The Building and Personal Property Coverage Form (CP 00 10) is the workhorse of commercial property. It offers three coverage categories the insured selects on the declarations:

Coverage Extensions and Additional Coverages

The BPP includes Additional Coverages (debris removal - usually 25% of the loss plus an extra allowance; preservation of property; fire department service charge; pollutant cleanup, capped annually) and Coverage Extensions available when the insured carries a stated coinsurance percentage (newly acquired or constructed property, personal property off premises, outdoor property, and valuable papers). These extensions are additional amounts; the exam tests whether a candidate knows they require the coinsurance condition to be met.

Tenant's Improvements and Betterments

A frequently tested wrinkle: improvements and betterments installed by a tenant are the tenant's business personal property, not the landlord's building. If destroyed, they are valued based on the unexpired lease term (use value), and if the tenant repairs them at its own expense they are settled like other BPP. Knowing who insures the improvements - tenant under BPP, not landlord under Building - is a steady exam point.

Causes of Loss, Coinsurance, and Valuation

The BPP itself contains no perils - it is paired with a separate Causes of Loss form (Basic, Broad, or Special). Valuation defaults to ACV unless the Replacement Cost optional coverage is elected on the declarations. The form carries an 80% coinsurance default (adjustable to 90% or 100%) and offers options that suspend or modify it - Agreed Value, Inflation Guard, and the Optional Coverages section. A candidate must connect the BPP (what is insured) to the Causes of Loss form (which perils) to answer a complete commercial-property question.