9.2 Building and Personal Property Coverage Form (BPP)

The CP 00 10 Coverage Form

The Building and Personal Property (BPP) Coverage Form (CP 00 10) is the backbone of commercial property. It states what is insured; a separate Causes of Loss form states which perils apply. Covered property splits into three coverages, and each is insured only when a limit appears beside it on the declarations.

Coverage A — Building

The described building plus completed additions; permanently installed fixtures, machinery, and equipment; outdoor fixtures; and personal property the insured owns to maintain or service the premises (fire extinguishers, floor coverings, appliances, refrigerating and ventilating gear). Additions under construction are also Building.

Coverage B — Your Business Personal Property

Owned property used in the business: furniture, fixtures, machinery, equipment, and stock (raw materials, goods in process, finished goods, supplies). Tenant Improvements and Betterments — alterations a tenant made and cannot legally remove — are insured here, not as Building.

Coverage C — Personal Property of Others

Others' property in the insured's care, custody, or control; loss is paid to the owner, even if the insured is not legally liable.

Property Not Covered

The form also lists property not covered, which the exam tests against the broad coverage grants above. Excluded items include money and securities (insure these under commercial crime), accounts and bills, land, water, growing crops, automobiles held for sale, the cost of excavations, foundations below the lowest floor, outdoor signs not attached to the building, and electronic data. Vehicles licensed for road use are excluded because they belong on a commercial auto policy, not on commercial property.

Deductibles and the Mortgage Holder

The BPP carries a flat per-occurrence deductible that applies once per loss, regardless of how many coverages or buildings are involved (a windstorm hitting two insured buildings triggers one deductible). The form also protects the mortgage holder (mortgagee), who has rights independent of the insured: the mortgagee receives loss payment to the extent of its interest, gets its own notice of cancellation, and may still collect even if the insured's own claim is denied for fraud or failure to comply, provided the mortgagee pays premium and files proof of loss on request.

Coverage A vs Coverage B on the Exam

Test questions routinely ask you to sort a list of items into Building or Business Personal Property. The reliable rule: if it is permanently attached and serves the structure, it is Building; if it is movable and used to run the business, it is Business Personal Property. A built-in furnace, central air, and the wall-to-wall lighting are Building. Display racks, computers, the cash register, and inventory are Business Personal Property.

The recurring tenant trap stays the same: improvements the tenant installed and cannot remove are the tenant's Coverage B, even though they are physically attached to the landlord's building. If the exam describes an owner-occupant, those same improvements are simply Building.

Coverage Extensions and Loss Settlement

If the insured carries the form at 80 percent coinsurance or more, several Coverage Extensions apply as additional amounts: Newly Acquired or Constructed Property, Personal Property Off-Premises, Valuable Papers, and Outdoor Property.

The form's standard valuation is Actual Cash Value (ACV) unless a Replacement Cost option is elected on the declarations. ACV = Replacement Cost minus depreciation.

Worked ACV example: Equipment costs $40,000 new and is 60% depreciated. ACV = $40,000 - $24,000 = $16,000, which is the most ACV settlement pays before any deductible.

When Replacement Cost is elected, the insurer pays to repair or replace with new property of like kind and quality with no depreciation, but only if the insured actually repairs or replaces; until then the insurer pays ACV and the insured claims the depreciation holdback afterward. Replacement Cost does not apply to stock the insured sells (valued at selling price less discounts), or to tenant improvements the tenant does not replace.

Additional Coverages

Beyond the extensions, the form grants additional coverages that pay over and above the policy limit: Debris Removal, Preservation of Property (protection while moving property to safety), Fire Department Service Charge (up to $1,000), and Pollutant Cleanup and Removal (up to $10,000 per year). Debris Removal is paid up to 25% of the loss plus the deductible, and an additional $25,000 is available when the standard allowance is exhausted.

The Coinsurance Penalty

The BPP coinsurance clause requires the insured to carry a limit equal to a stated percentage (often 80%) of the property's value at the time of loss. Underinsure and the insurer pays only a proportion.

Coinsurance formula: (Limit Carried / Limit Required) x Loss = Payment, capped at the policy limit, then minus the deductible.

Worked example: A building worth $500,000 needs $400,000 (80%) but the insured carries only $300,000. A $100,000 fire loss with a $1,000 deductible:

• Did/Should = $300,000 / $400,000 = 0.75
• 0.75 x $100,000 = $75,000
• Minus $1,000 deductible = $74,000 paid

The $25,000 shortfall is the coinsurance penalty the insured absorbs for underinsuring.