9.2 Building and Personal Property Coverage Form (BPP)

The Workhorse of Commercial Property: CP 00 10

The Building and Personal Property Coverage Form (CP 00 10) is the most-tested commercial property form. It insures direct physical loss to three property categories, each shown with its own limit on the declarations:

• Building — the described structure, completed additions, fixtures, permanently installed machinery and equipment, and outdoor fixtures. It also includes (up to specific sublimits) appliances used to maintain the building and personal property of the insured used to service the premises (e.g., fire-extinguishing equipment, outdoor furniture, floor coverings).
• Your Business Personal Property (BPP) — furniture, fixtures, machinery, stock, and other contents owned by the insured and used in the business, located 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 the owner, but payment goes to the named insured for the owner's account.

Coinsurance — The Single Most-Tested Calculation

Commercial property carries a coinsurance clause (typically 80%, 90%, or 100%) requiring the insured to carry a limit equal to at least that percentage of the property's value at the time of loss. If the insured is underinsured, the penalty formula applies:

(Did Carry / Should Have Carried) × Loss − Deductible = Payment (never more than the policy limit)

Worked example: A building is worth $1,000,000 with an 80% coinsurance clause, so the insured should carry $800,000. The insured actually carries only $600,000 and has a $2,500 deductible. A fire causes $300,000 in damage.

• Should have carried: $1,000,000 × 80% = $800,000
• Ratio: $600,000 / $800,000 = 0.75
• Loss × ratio: $300,000 × 0.75 = $225,000
• Less deductible: $225,000 − $2,500 = $222,500 paid

The insured absorbs the $77,500 difference plus the deductible as a coinsurance penalty for underinsuring.

Valuation, Coverage Extensions, and Additional Coverages

The default loss settlement is Actual Cash Value (ACV) = replacement cost minus depreciation. Insureds may attach Replacement Cost (CP 04 38 optional coverage) to avoid depreciation, but they must actually repair/replace and the coinsurance condition still uses replacement cost values.

Key built-in Additional Coverages (paid in addition to the limit): Debris Removal (25% of loss + deductible, plus an extra $25,000), Preservation of Property, Fire Department Service Charge ($1,000 default), Pollutant Cleanup ($10,000 annual aggregate).

Key Coverage Extensions (when 80%+ coinsurance applies): Newly Acquired or Constructed Property (buildings to $250,000; BPP to $100,000, 30-day limit), Personal Effects/Property of Others ($2,500), Valuable Papers ($2,500), Outdoor Property ($1,000 / $250 per tree, shrub, plant).

Trap: ACV vs. Replacement Cost. On the exam, if the policy is silent, use ACV; depreciation is subtracted only on ACV settlements, never on a true Replacement Cost settlement.

Property Not Covered and the Vacancy Provision

The BPP lists property not covered, including money and securities (insure those under Crime), accounts/bills/records (use Valuable Papers), land, water, growing crops, vehicles licensed for road use, and the cost to research or restore lost information on damaged records. Outdoor signs, antennas, and the like carry their own sublimits.

The vacancy provision is heavily tested. A building is considered vacant when it does not contain enough business personal property to conduct customary operations; under construction does not count as vacant. If the building has been vacant for more than 60 consecutive days before a loss, the insurer (1) will NOT pay at all for vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft, and (2) reduces payment for all OTHER covered losses by 15%. A property manager who lets a building sit empty for two months therefore risks a flat denial of a vandalism claim.

Note the 60-day clock measures before the loss, and ownership counts the whole building unless an owner occupies and a tenant's portion is at issue.

Deductibles and How They Apply

The BPP applies a flat per-occurrence deductible that is subtracted once from the total covered loss, after any coinsurance adjustment, regardless of how many items or buildings are damaged in a single event. Insurers may offer higher deductibles for premium credit, percentage deductibles for catastrophic perils such as wind/hail in coastal states, and separate deductibles by peril. When working a numeric problem, the correct sequence is: (1) determine the loss amount and valuation basis, (2) apply the coinsurance ratio if the insured is underinsured, (3) subtract the deductible, and (4) cap the result at the policy limit.

Reversing steps 2 and 3 — subtracting the deductible before coinsurance — is a common wrong answer the exam plants as a distractor, so always apply coinsurance first, then the deductible.

The 100-Foot Rule and Property In Transit

The BPP covers business personal property in or within 100 feet of the described premises. Property that travels beyond that radius - goods in transit, at a job site, or at an unscheduled location - needs inland marine coverage instead, because the BPP's territorial limit drops off at 100 feet.

This boundary is a frequent exam trap: a contractor's tools stolen from a truck a mile away are not BPP losses. The form also distinguishes the insured's own business personal property from personal property of others in the insured's care; the latter is paid to the named insured for the owner's account and is a bridge to bailee and warehouse exposures.

Optional Coverages and Selling Up

Beyond the replacement-cost option, the BPP offers selectable enhancements the exam expects you to recognize: Agreed Value (suspends coinsurance once a statement of values is filed), Inflation Guard (raises the limit automatically), and Replacement Cost including "Personal Property of Others." A producer reviewing a BPP should confirm the valuation basis, the coinsurance percentage, and whether the insured has selected agreed value to neutralize coinsurance risk - the same three levers that determine the loss payment in a numeric question.