9.2 Building and Personal Property Coverage Form (BPP)

The Building and Personal Property Coverage Form

The Building and Personal Property Coverage Form (CP 00 10) is the workhorse of commercial property. It defines WHAT is covered; a separate causes of loss form defines WHICH perils apply. The declarations show a Coverage Limit opposite each of three property categories the insured elects to cover:

• Building — the described structure, completed additions, fixtures (including outdoor fixtures), permanently installed machinery and equipment, and maintenance/service equipment.
• Your Business Personal Property (BPP) — contents the insured owns and uses in business: stock, furniture, machinery, and Tenant Improvements and Betterments the insured made but cannot legally remove.
• Personal Property of Others — others' property in the insured's care, custody, or control; loss is paid to the owner, not the insured.

A key habit: business personal property is covered while in the building or in the open (or in a vehicle) within 100 feet of the described premises.

Tenant Improvements and Betterments

A frequent exam point: improvements a tenant pays to install but cannot legally remove (a built-in counter, new wiring, partition walls) are the tenant's Business Personal Property, not the landlord's Building. If the tenant insures them and a covered loss occurs before the lease ends, the BPP pays. Many candidates wrongly file these under Building — they belong to whichever party paid for and uses them. The landlord, by contrast, insures the structure itself under the Building category.

Additional Coverages, Extensions, and Valuation

The BPP grants four Additional Coverages and several Coverage Extensions (extensions require 80% coinsurance to apply). Memorize the dollar figures:

Deductibles and property not covered

The BPP carries a flat per-occurrence deductible (default $1,000, adjustable). It also lists property not covered: money and securities (insure under Crime), accounts/bills/records as such, land/water/growing crops, outdoor signs not attached to the building, vehicles licensed for road use, and aircraft. Trying to recover stolen cash under the BPP is a classic wrong answer — that exposure belongs to a Commercial Crime coverage part.

Valuation and the coinsurance penalty

The BPP default valuation is Actual Cash Value (ACV) = replacement cost minus depreciation. Replacement Cost valuation applies only if the insured elects it (Optional Coverage) on the declarations. A subtle rule: even when replacement cost is elected, the insurer pays only ACV until repairs are actually completed, then settles the depreciation holdback once the insured rebuilds.

The coinsurance clause (default 80%) penalizes underinsurance. The formula is:

(Did Carry / Should Have Carried) x Loss − Deductible = Payment

Worked example. A building is worth $500,000; coinsurance is 80%, so the insured should carry $400,000. The insured actually carries only $300,000. A covered fire causes a $100,000 loss; the deductible is $1,000.

• Penalty ratio = $300,000 / $400,000 = 0.75
• $100,000 x 0.75 = $75,000
• $75,000 − $1,000 deductible = $74,000 paid

The insured eats $26,000 for failing to insure to value. Contrast this with insuring to value: had the insured carried the full $400,000, the ratio would be 1.0, and the $100,000 loss would pay $99,000 after the deductible — a $25,000 difference driven solely by the coinsurance penalty.

Coverage Extensions in detail

The Coverage Extensions (which require the 80% coinsurance to be in force) broaden the BPP in practical ways: Newly Acquired or Constructed Property ($250,000 building / $100,000 BPP, 30 days), Personal Property Off Premises while temporarily away, Outdoor Property, Property Off-Premises, and Valuable Papers and Records (cost to research/replace, default $2,500). These are extensions of the existing limit, not separate buckets stacked on top — a distinction the exam draws against the four Additional Coverages, which apply regardless of coinsurance.

Why coinsurance exists

Without a coinsurance clause, owners would deliberately underinsure, betting that most losses are partial. Coinsurance rewards insuring to value: meet the percentage and partial losses are paid in full (less deductible); fall short and the penalty ratio applies. Note the clause never increases payment above the policy limit, and it does not reduce payment on a total loss up to the limit.

Endorsements such as Agreed Value suspend coinsurance entirely, which is why a well-advised insured with a fluctuating or hard-to-value building often elects it rather than risk a penalty at claim time. Insuring to at least the stated percentage of full replacement value is the single most important loss-control habit an agent can teach a commercial property client, because the penalty surfaces only after a loss — exactly when the client can least absorb it.