9.2 Building and Personal Property Coverage Form (BPP)

The CP 00 10 Workhorse

The Building and Personal Property (BPP) Coverage Form, CP 00 10, is the most-tested commercial property form. It defines what is insured; a separate Causes of Loss form (9.3) defines which perils apply. Coverage exists for a category only if a limit of insurance is shown for it on the declarations. The form sorts insured property into three coverages:

Coverage A — Building

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

Coverage B — Your Business Personal Property

Property the insured owns and uses in business: furniture and fixtures, machinery and equipment, stock (raw materials, goods in process, finished stock, and supplies), and the insured's labor and materials on others' property. Critically, tenant Improvements and Betterments fall under Coverage B — alterations a tenant made and cannot legally remove.

Coverage C — Personal Property of Others

Property of others in the insured's care, custody, or control at the premises. Loss is paid to the owner. Coverage C is not full bailee coverage; large bailee exposures need an inland marine floater.

A recurring exam subtlety is the landlord-versus-tenant split. The building owner insures the structure under Coverage A; the tenant insures its own furniture, equipment, stock, and tenant improvements under Coverage B; and either party can use Coverage C for property belonging to third parties on the premises. Mapping a fact pattern to the correct coverage letter is one of the most common BPP question formats, so read carefully to find who owns the damaged item and who paid for it.

Coverage Extensions and Additional Coverages

When the declarations show 80 percent or higher coinsurance (or value-reporting/agreed-value), the BPP grants extensions at no extra premium. Common limits the exam tests:

A few traps: the Newly Acquired extension is automatic for 30 days or until the policy ends, whichever is first; the Outdoor Property sub-limit caps any one tree, shrub, or plant at $250; and Debris Removal is an additional coverage that, when the 25% is exhausted, contributes an extra $25,000.

Valuation, Coinsurance, and the Worked Math

The BPP pays Actual Cash Value (ACV) unless Replacement Cost is selected by endorsement. ACV = Replacement Cost minus depreciation. Coverage applies the Coinsurance Condition (in CP 00 90): the insured must carry a limit at least equal to the stated percentage (usually 80%, 90%, or 100%) of the property's value at the time of loss.

Coinsurance formula: (Did Carry / Should Carry) × Loss − Deductible = Payment.

Worked example. A building is worth $1,000,000 with 80% coinsurance, so the insured should carry $800,000. He actually carries $600,000. A $200,000 fire loss with a $1,000 deductible pays:

($600,000 / $800,000) × $200,000 = 0.75 × $200,000 = $150,000, minus the $1,000 deductible = $149,000. The insured eats a coinsurance penalty for underinsuring. Note: the payment can never exceed the policy limit, and the penalty applies only to partial losses — at a total loss the limit is paid (subject to the limit being less than full value).

A further distinction the exam draws is Replacement Cost versus ACV at settlement. Even when Replacement Cost is endorsed, the insurer initially pays ACV and withholds the depreciation holdback until the insured actually repairs or replaces the property; an insured who never rebuilds collects only ACV. Watch for fact patterns where a business chooses not to rebuild and is surprised that the depreciation portion is never released. The coinsurance percentage applies to whichever valuation basis is in force, so a 90% coinsurance clause on Replacement Cost values requires a noticeably higher limit than the same clause on ACV values.

What Property the BPP Covers — and the Three Categories

The CP 00 10 insures three property categories, declared separately so coinsurance and limits apply to each:

Property not covered is a classic list: money and securities (covered by Crime), accounts/bills/records (as such), land/water, growing crops, vehicles licensed for road use, and the cost of excavations. Tenant's improvements and betterments are valued by the use interest if the tenant does not repair, prorated over the lease — a recurring distractor versus full replacement when the tenant does repair.